69.
Silly Putty Inc. has had sales of $12 million, $17 million, and $16 million for each of the last
three years. What would be the MAPE if the actual sales were $15 million using the
average approach?
A.
0.24 percent
1.01 percent
70.
Abracadabra Inc. has total assets of $106,000 and a debt ratio of 40 percent. If last year’s
sales were $145,000 and sales are expected to grow 10 percent in the future, what is
Abracadabra’s capital intensity ratio?
71.
Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has
$10.5 million in total assets and $1 million in current liabilities. The firm currently pays out
75 percent of its net income to shareholders. Assume that all assets and current liabilities
are expected to grow with sales. If Goldilochs does not want to rely on any external
sources of funds, what is the most sales can grow (in dollars)?
72.
Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has
$12 million in total assets and $500,000 in current liabilities. The firm currently pays out 25
percent of its net income to shareholders. Assume that all assets and current liabilities are
expected to grow with sales. If Goldilochs does not want to rely on any external sources of
funds, what is the most sales can grow (in dollars)?
73.
Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has
$12 million in total assets and $500,000 in current liabilities. The firm currently pays out 25
percent of its net income to shareholders. Assume that all assets and current liabilities are
expected to grow with sales. If Goldilochs does not want to rely on any external sources of
funds, what is the most sales can grow (in percent)?
74.
Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has
$10.5 million in total assets and $1 million in current liabilities. The firm currently pays out
75 percent of its net income to shareholders. Assume that all assets and current liabilities
are expected to grow with sales. If Goldilochs does not want to rely on any external
sources of funds, what is the most sales can grow (in percent)?
75.
Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has
$10.5 million in total assets. The firm’s chief financial officer is projecting a 25 percent
increase in sales. The firm has $1.25 million in accounts payable and $1,500,000 in long–
term debt (bonds). The firm currently pays out 20 percent of its net income to
shareholders. Assuming that all assets and spontaneous liabilities are expected to grow
with sales, how much in additional funds will Goldilochs need from external sources to
fund the expected growth?
76.
Which of the following statements is incorrect?
77.
Goldilochs Inc. reported sales of $8 million and net income of $2 million. The firm has a
total asset turnover of 3.2. The firm’s chief financial officer is projecting a $5 million
increase in sales and that spontaneous liabilities will increase by $350,000 automatically.
The firm currently pays out 80 percent of its net income to shareholders. Assuming that all
assets and current liabilities are expected to grow with sales, how much in additional
funds will Goldilochs need from external sources to fund the expected growth?
78.
Goldilochs Inc. reported sales of $8 million and net income of $2 million. The firm has a
total asset turnover of 1.2. The firm’s chief financial officer is projecting a $6 million
increase in sales and that spontaneous liabilities will increase by $1 million automatically.
The firm currently pays out 50 percent of its net income to shareholders. Assuming that all
assets and current liabilities are expected to grow with sales, how much in additional
funds will Goldilochs need from external sources to fund the expected growth?
79.
Which of the following is likely to increase the firm’s additional funds needed?
80.
Suppose a firm was planning to greatly reduce its raw materials inventory next year by
introducing just-in–time inventory control procedures. Assuming no other changes to the
firm’s operations, what would this do to AFN?
81.
Which of the following statements is correct?
82.
Suppose you were forecasting sales for a firm that exhibited a cyclical pattern within each
week. How would you go about forecasting sales for this firm?
Essay Questions
83.
Explain when it is appropriate to use the naїve, average, and seasonality– and trend-
adjusted approaches to forecasting sales.
84.
Articulate the rationale of the additional funds needed approach to estimating the need for
a firm to seek external financing.
85.
Is forecasting more important for small firms or large firms? Why?
86.
Which liabilities would tend to spontaneously increase with sales? Why?
87.
Suppose that the 2013 actual and 2014 projected financial statements for CMT Corp. are
initially as shown in the following tables. In these tables, sales are projected to rise 35
percent in the coming year, and the components of the income statement and balance
sheet that are expected to increase at the same 35 percent rate as sales need to be
calculated and are indicated with a blank space (___). Assuming that CMT Corp. wants to
cover the AFN with 30 percent equity, 35 percent long-term debt, and the remainder from
notes payable, what amount of additional funds will they need to raise if debt carries a 9
percent interest rate?
88.
The financial plan is an important element in the process of strategic planning. What does
strategic planning involve?
89.
How is the capital intensity ratio calculated? How is it used in the AFN formula?
90.
What are two issues that are not addressed regarding fixed assets if one simply uses the
AFN formula in its simplest form? How would they impact the AFN calculation?
91.
Explain the process of financial planning process of a firm.
92.
Contrast the difference between first order effects and higher order effects when
forecasting financial statements.
