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Chapter 04
Long-Term Financial Planning and Growth
Multiple Choice Questions
1.
Phil is working on a financial plan for the next three years. This time period
is referred to as which one of the following?
2.
Atlas Industries combines the smaller investment proposals from each
operational unit into a single project for planning purposes. This process is
referred to as which one of the following?
3.
Which one of the following terms is applied to the financial planning method
which uses the projected sales level as the basis for determining changes in
balance sheet and income statement account values?
4.
Which one of the following terms is defined as dividends paid expressed as
a percentage of net income?
5.
Which one of the following correctly defines the retention ratio?
6.
Which one of the following ratios identifies the amount of assets a firm
needs in order to generate $1 in sales?
7.
The internal growth rate of a firm is best described as the:
8.
The sustainable growth rate of a firm is best described as the:
9.
You are developing a financial plan for a corporation. Which of the following
questions will be considered as you develop this plan?
I. How much net working capital will be needed?
II. Will additional fixed assets be required?
III. Will dividends be paid to shareholders?
IV. How much new debt must be obtained?
10.
Financial planning:
11.
Financial planning accomplishes which of the following for a firm?
I. determination of asset requirements
II. development of plans to contend with unexpected events
III. establishment of priorities
IV. analysis of funding options
12.
Which of the following questions are appropriate to address during the
financial planning process?
I. Should the firm merge with a competitor?
II. Should additional shares of stock be sold?
III. Should a particular division be sold?
IV. Should a new product be introduced?
13.
Which one of the following statements concerning financial planning for a
firm is correct?
14.
You are getting ready to prepare pro forma statements for your business.
Which one of the following are you most apt to estimate first as you begin
this process?
15.
Which one of the following statements is correct?
16.
When utilizing the percentage of sales approach, managers:
I. estimate company sales based on a desired level of net income and the
current profit margin.
II. consider only those assets that vary directly with sales.
III. consider the current production capacity level.
IV. can project both net income and net cash flows.
17.
Which one of the following is correct in relation to pro forma statements?
18.
When constructing a pro forma statement, net working capital generally:
19.
A pro forma statement indicates that both sales and fixed assets are
projected to increase by 7 percent over their current levels. Given this, you
can safely assume that the firm:
20.
A firm is currently operating at full capacity. Net working capital, costs, and
all assets vary directly with sales. The firm does not wish to obtain any
additional equity financing. The dividend payout ratio is constant at 40
percent. If the firm has a positive external financing need, that need will be
met by:
