FIN 315 ch.4

turner's return on equity is 12% and its retention ratio is 60%. what is its sustainable growth rate?

(.12 x .60)/(1-(.12 x .60)) = 7.76%

cheese co. had net income of $300 and paid out $125 in cash dividends to stockholders. what is the plowback ratio?

1-(125/300) = 58.33%

moores generated $140,000 in net income and $1.6m in sales on $2.7m in assets. the firm has a capital intensity ratio of ______

2.7/1.6 = 1.69

last year, benton inc. had net income of 3.5m and paid out 700,000 in cash dividends. if income this year is 4.1m and the dividend payout ratio is held constant, how much will be paid in dividends?

700,000/(4.1/3.5) = 820,000

when constructing a pro forma income statement, the first step is to supply:

a sales figure

in a financial plan using the percentage of sales approach, why is it assumes that assets increases with sales?

additional working capital and fixed assets are needed to support growth

the sustainable growth rate can be used to _____

assess planned growth

the text quotes conventional business wisdom as saying that financial plans don't work, but financial planning does. what does that mean?

because financial plans are forecasts, they seldom happen as foreseen, but they allow managers to examine goals and prioritize

the sustainable growth rate formula, g = ROE x b, gives accurate results ONLY when total equity is takes from the:

beginning of period balance sheet

the main advantage of the percent of sales approach to producing a pro forma statement is:

ease and practicality

a financial plan looks at what needs to be done in the

future

financial planning is a(n) ____ process

iterative

the aggregation process determines the total:

needed investment

Growth, by itself, is:

not an appropriate goal

if a firm maintains a constant debt-equity ratio and does not use any new external equity financing, the firm can grow at a rate no greater than its _____

sustainable growth rate