Finance Chapter 18 2 The Projected Growth Rate Less Than

59.

If the projected growth rate is less than the firm’s sustainable growth rate:

60.

Contingency planning is:

61.

A major difference between financial planning and forecasting is that financial planning:

62.

A firm has current sales of $2.4 million and fixed assets of $1.65 million. The firm is currently operating at 88% of capacity.

How high can the firm’s sales go without requiring any additional fixed assets?

63.

The flexibility of financial plans is evident in the extent that:

64.

Dawson Metals is currently operating at 94% of its capacity and has sales of $3.1 million and fixed assets of $2.5 million.

How much should the firm budget for fixed asset purchases if sales are projected to increase by 9% next year?

65.

The outputs of a financial planning model often include:

66.

Planners have determined that sales will increase by 20% next year, and the profit margin will remain at 10% of sales. Which

one of the following statements is correct if the payout ratio remains at 30%?

67.

A percentage-of-sales model forecasts that cost of goods sold will remain at 80% of sales. If sales revenues are expected to

grow by 20% next year, cost of goods sold:

68.

A firm’s goal is to maintain a 75% debt-equity ratio. How much equity would be required if the results of a financial

planning model indicate that the firm’s assets will grow to $4 million?

69.

If a firm commits to a dividend payment and the amount of debt that it is prepared to issue, what must be the balancing

item?

70.

The final variable to have its value determined in a financial plan is often referred to as the:

71.

Which one of the following is most apt to occur if a financial plan shows sources of funds to be $100,000 and uses of funds

to be $90,000?

72.

Increased needs for net working capital are:

73.

How much is required in external financing if first-stage pro forma statements indicate $1 million in net income, $300,000 in

dividends, and a $900,000 increase in total assets?

74.

If a firm’s pro forma statements project a net income of $5,000, dividends of $2,000, and an external financing requirement

of $2,000, then:

75.

The first step in constructing a financial planning model is to:

76.

The rate at which the assets of a firm can grow without the requirement of any external sources of financing is the:

77.

Which one of the following statements is correct concerning the internal growth rate?

78.

Which one of the following changes will decrease a firm’s internal growth rate?

79.

Under which one of the following capital structures will a firm’s internal growth rate exceed its sustainable growth rate?

80.

What would help a firm boost its internal growth rate?

81.

The sustainable growth rate is the maximum growth rate that the firm can achieve

82.

The sustainable growth rate:

83.

What is the sustainable growth rate for a firm with $250,000 in net income, $100,000 in common stock dividends, and equity

of $1 million?

84.

What is the internal growth rate for a firm with an ROE of 20%, a dividend payout ratio of 40%, and an equity–to-debt ratio

of 60%?

85.

Which one of the following would increase the sustainable growth rate?

86.

All of the following are part of the financial planning process except:

87.

Which one of these is least likely to change proportionally with sales?

88.

A firm’s internal growth rate is all of the following except:

89.

A financial plan:

90.

In the percentage of sales model, which one of these is most likely to increase in uneven increments as sales increase?

91.

Which one of these best describes the relationship between net working capital (NWC) and sales?

92.

A percentage of sales model projects sales to increase by 5% annually over the next 4 years. If costs are forecast at a constant

80% of sales, and this year’s income is $1,250, the forecast income in the fourth year will be:

93.

If a firm’s sales increase by 12%, and it has no spare capacity, it must increase fixed assets by at least:

94.

If book equity increases by $2,000, the firm does not issue new equity, and its net income is $2,500, then:

95.

Sources and uses of funds are made equal through:

96.

Which one of the following statements regarding financial planning models is false?

97.

Which one of the following is not an output of a financial plan?

98.

If a firm does not want to use either dividends or debt as the plug, then the obvious plug is:

99.

A firm has projected sales of $328,000, costs of goods sold equal to 68% of sales, interest of $18,500, a tax rate of 35%, and

a dividend payout ratio of 60%. What will be the addition to retained earnings?

100.

Assume a firm wants to hold its current long-term debt–to-equity ratio constant at 0.55 and its payout ratio constant at 35%.

The firm neither issues nor repurchases shares. If the firm generates $326,000 of net income, what is the maximum amount

that the firm can increase its long-term debt?

101.

A firm’s net assets equal 55% of sales. The firm expects sales to increase of $78,000 next year and to generate $6,500 of

retained earnings. What is the external financing need?

Chapter 18 Test bank – Static Summary