Chapter 04 LongTerm Financial Planning and Growth
Student: ___________________________________________________________________________
1.
Atlas
... [Show More] 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?
A. Conjoining.
B. Aggregation.
C. Conglomeration.
D. Appropriation.
E. Summation.
2.
Which one of the following terms is applied to the financial planning method that uses the projected sales level as the basis for determining
changes in balance sheet and income statement account values?
A. Percentage of sales method.
B. Sales dilution method.
C. Sales reconciliation method.
D. Commonsize method.
E. Trend method.
3.
Which one of the following terms can be defined as the net income that a firm reinvests in itself?
A. Retention ratio.
B. Dividend yield.
C. Dividend payout ratio.
D. Internal growth rate.
E.
Cash plowback.
4.
Which one of the following ratios identifies the amount of total assets a firm needs in order to generate $1 in sales?
A. Return on assets.
B. Equity multiplier.
C. Retention ratio.
D. Capital intensity ratio.
E. Fixed asset turnover ratio.
5.
The internal growth rate of a firm is best described as the:
A. Minimum growth rate achievable assuming a 100 percent retention ratio.
B. Minimum growth rate achievable if the firm maintains a constant equity multiplier.
C. Maximum growth rate achievable excluding external financing of any kind.
D. Maximum growth rate achievable excluding any external equity financing while maintaining a constant debtequity ratio.
E. Maximum growth rate achievable with unlimited debt financing.
6.
The sustainable growth rate of a firm is best described as the:
A. Minimum growth rate achievable assuming a 100 percent retention ratio.
B. Minimum growth rate achievable if the firm maintains a constant equity multiplier.
C. Maximum growth rate achievable excluding external financing of any kind.
D. Maximum growth rate achievable excluding any external equity financing while maintaining a constant debtequity ratio.
E. Maximum growth rate achievable with unlimited debt financing.
7.
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?
A. I and IV only.
B. II and III only.
C. I, III, and IV only.
D. II, III, and IV only.
E. I, II, III, and IV.
8.
Financial planning:
A. Focuses solely on the shortterm outlook for a firm.
B. Is a process that firms employ only when major changes to a firm's operations are anticipated.
C. Is a process that firms undergo once every five years.
D. Considers multiple options and scenarios.
E. Provides minimal benefits for firms that are highly responsive to economic changes.
9.
Financial planning accomplishes which of the following for a firm?
I. Determination of asset requirements.
II. Development of contingency plans.
III. Establishment of priorities.
IV. Analysis of funding options.
A. I and III only.
B. II and IV only.
C. I, III, and IV only.
D. I, II, and III only.
E. I, II, III, and IV.
10.
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?
A. I, II, and III only.
B. I, II, and IV only.
C. I, III, and IV only.
D. II, III, and IV only.
E. I, II, III, and IV.
11.
Which one of the following statements concerning financial planning for a firm is correct?
A. Financial planning for fixed assets is done on a segregated basis within each division.
B. Financial plans often contain alternative options based on economic developments.
C. Financial plans frequently contain conflicting goals.
D. Financial plans assume that firms obtain no additional external financing.
E. The financial planning process is based on a single set of economic assumptions.
12.
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?
A. Need for additional fixed assets.
B. Current fixed costs.
C. Projected sales.
D. Desired net income.
E. Desired dividend payments.
13.
Which one of the following statements is correct?
A. Pro forma statements must assume that no new equity is issued.
B. Pro forma statements are projections, not guarantees.
C. Pro forma statements are limited to a balance sheet and income statement.
D. Pro forma financial statements must assume that no dividends will be paid.
E. Net working capital needs are excluded from pro forma computations.
14.
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.
A. I and II only.
B. II and III only.
C. III and IV only.
D. I, III, and IV only.
E. II, III, and IV only. [Show Less]