What is the full name of the great American short story writer O’Henry?
Correct answer(s):
- William Sydney Porter
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All else constant, which one of the following will increase the internal rate of growth?
Correct answer(s):
- decrease in total assets
Blasco Industries is currently at full-capacity sales. Which one of the following is limiting sales to this level?
Correct answer(s):
- fixed assets
Sales can often increase without increasing which one of the following?
Correct answer(s):
- fixed assets
A firm’s external financing need is financed by which of the following?
Correct answer(s):
- debt or equity
Martin Aerospace is currently operating at full capacity based on its current level of assets. Sales are expected to increase by 4.5 percent next year, which is the firm’s internal rate of growth. Net working capital and operating costs are expected to increase directly with sales. The interest expense will remain constant at its current level. The tax rate and the dividend payout ratio will be held constant. Current and projected net income is positive. Which one of the following statements is correct regarding the pro forma statement for next year?
Correct answer(s):
- Total assets will increase at the same rate as sales.
Which one of the following will increase the maximum rate of growth a corporation can achieve?
Correct answer(s):
- decrease in the dividend payout ratio
A firm’s net working capital and all of its expenses vary directly with sales. The firm is operating currently at 96 percent of capacity. The firm wants no additional external financing of any kind. Which one of the following statements related to the firm’s pro forma statements for next year must be correct?
Correct answer(s):
- The firm cannot exceed its internal rate of growth.
The plowback ratio is:
Correct answer(s):
- the percentage of net income available to the firm to fund future growth.
Which one of the following capital intensity ratios indicates the largest need for fixed assets per dollar of sales?
Correct answer(s):
- 1.15
A firm is operating at 90 percent of capacity. This information is primarily needed to project which one of the following account values when compiling pro forma statements?
Correct answer(s):
- fixed assets
Which one of the following policies most directly affects the projection of the retained earnings balance to be used on a pro forma statement?
Correct answer(s):
- dividend policy
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:
Correct answer(s):
- long-term debt.
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:
Correct answer(s):
- is currently operating at full capacity.
When constructing a pro forma statement, net working capital generally:
Correct answer(s):
- varies proportionally with sales.
Which one of the following is correct in relation to pro forma statements?
Correct answer(s):
- Inventory changes are directly proportional to sales changes.
Which one of the following statements is correct?
Correct answer(s):
- Pro forma statements are projections, not guarantees.
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?
Correct answer(s):
- sales forecast
Which one of the following statements concerning financial planning for a firm is correct?
Correct answer(s):
- Financial plans often contain alternative options based on economic developments.
Financial planning:
Correct answer(s):
- considers multiple options and scenarios for the next two to five years.