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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.
The sustainable growth rate of a firm is best described as the:
Correct answer(s):
- maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio.
The internal growth rate of a firm is best described as the:
Correct answer(s):
- maximum growth rate achievable excluding external financing of any kind.
Which one of the following ratios identifies the amount of assets a firm needs in order to generate $1 in sales?
Correct answer(s):
- capital intensity ratio
Which one of the following correctly defines the retention ratio?
Correct answer(s):
- addition to retained earnings divided by net income
Which one of the following terms is defined as dividends paid expressed as a percentage of net income?
Correct answer(s):
- dividend payout ratio
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?
Correct answer(s):
- percentage of sales method
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?
Correct answer(s):
- Aggregation
Phil is working on a financial plan for the next three years. This time period is referred to as which one of the following?
Correct answer(s):
- planning horizon
Beach Wear has current liabilities of $350,000, a quick ratio of 1.65, inventory turnover of 3.2, and a current ratio of 2.9. What is the cost of goods sold?
Correct answer(s):
- $1,400,000