FIN 315 CHAPTER 4

ALL ELSE EQUAL WHEN THE RATE OF GROWTH IN SALES OR ASSETS IN A FINANCIAL PLAN IS HIGHER EXTERNAL FINANCING NEEDS WILL BE

GREATER

GIVEN AN INTERNAL GROWTH RATE OF 3 PERCENT A FIRM CAN___

GROW 3 PERCENT OR LESS WITHOUT ANY ADDITION EXTERNAL FINANCING

ALL OTHER THINGS STAYING THE SAME A HIGH GROWTH FIRM WILL HAVE A RELATIVELY___ NEEDS FOR EXTERNAL FINANCING THAN A LOW GROWTH FIRM

HIGHER

WHEN CONSTRUCTING A PRO FORMA INCOME STATEMENT THE FIRST STEP IS TO SUPPLY

A SALES FIGURE

THE SUSTAINABLE RATE CAN BE USED TO ___

ACCESS PLANNED GROTH

IN A FINANCIAL PLAN USING THE PERCENTAGE OF SALES APPROACH WHY IS IT ASSUMED THAT ASSETS INCREASE WITH SALES

ADDITIONAL WORKING CAPITAL FIXED ASSETS ARE NEEDED TO SUPPORT GROWTH

WHICH ONE OF THESE WILL DECREASE A FIRM SUSTAINABLE RATE OF GROWTH

AN INCREASE IN THE DIVIDED PAYOUT RATIO

THE MAIN ADVANTAGE OF THE PERCENTAGE OF SALES APPROACH TO PRODUCING PRO FORMA STATEMENT IS

EASE AND PRACTICALLY

A COMMONLY CITED REASON FOR FINANCIAL FAILURE IS A LACK OF

EFFECTIVE LONG RANGE PLANNING

TRUE OR FALSE GIVEN EXTERNAL FINANCING NEEDS IN A FINANCIAL PLAN THE FIRM MUST BORROW BOTH LONG AND SHORT TERM FUNDS

FALSE

TRUE OR FALSE: FINANCIAL PLANNING PROCESS WILL NOT CHANGE FROM FIRM TO FIRM

FALSE

A FINANCIAL PLAN LOOKS AT WHAT NEEDS TO BE DONE IN THE

FUTURE

AN INCREASE IN A FIRM TOTAL ASSET TURNOVER WILL___ THE SUSTAINABLE GROWTH RATE

INCREASE

AN INCREASE IN THE PROFIT MARGIN WILL___ A FIRM SUSTAINABLE GROWTH RATE

INCREASE

IF A FIRM INCREASES ITS DEBT EQUITY RATIO ITS SUSTAINABLE RATE OF GROWTH WILL___

INCREASE

THE RATIO OF TOTAL ASSETS TO SALE IS KNOWN AS THE ___

CAPITAL INTENSITY RATIO

WHICH OF THE FOLLOWING CAN BE ACCOMPLISHED WITH FINANCIAL PLANNING

1) AVOIDING SURPRISES 2)EXPLORING OPTIONS

A FINANCIAL MODEL CAN BE USED TO TEST THE FEASIBILITY OF A PLANNED GROWTH RATE BECAUSE IT INCORPORATE WHICH OF THE FOLLOWING

1) THE ASSET TURNOVER RATE 2)THE FIRM USE OF FINANCIAL LEVERAGE 3) THE FIRM DIVIDEND POLICY

BASED ON ROE AND THE SUSTAINABLE GROWTH RATE WHICH OF THE FOLLOWING FACTORS AFFECT A FIRMS ABILITY TO SUSTAIN GROWTH

1)PROFIT MARGIN 2)DIVIDEND POLICY 3)FINANCIAL

WHICH OF THE FOLLOWING ARE COMMON ELEMENTS OF A FINANCIAL PLANNING MODEL

1)SALES FORECAST 2)PRO FORMA STATEMENTS 3)ECONOMIC ASSUMPTION

THE TEXT CONVENTIONAL BUSINESS WISDOM AS SAYING THAT FINANCIAL PLAN DINT WORK BUT FINANCIAL PLANNING DOES WHAT DOES THAT MEAN

BECAUSE FINANCIAL PLANS ARE FORECAST THEY SELDOM HAPPEN AS FORESEEN BUT THEY ALLOW MANAGERS TO EXAMINE GOALS AND PRIORITIZE

IN A FINANCIAL PLAN HOW IS THE AMOUNT OF BORROWING DETERMINE

BY MANAGEMENT

THE AGGREGATION PROCESS DETERMINE THE TOTAL

NEEDED INVESTMENT

THE AGGREGATION PROCESS DETERMINES THE TOTAL

NEEDED INVESTMENT

GROWTH ITSELF IS

NOT AN APPROPRIATE GOAL

THE PERCENTAGE OF SALES APPROACH SEPARATES ACCOUNTS ON THE PRO FORMA INCOME STATEMENT AND BALANCE SHEET INTO THOSE THAT CHANGE DIRECTLY WITH___ AND THOSE THAT DO NOT

SALES

IF A FIRM MAINTAINS A CONSTANT DEBT EQUITY RATIO AND DOES NOT USE NEW EXTERNAL EQUITY FINANCING THE FIRM CAN GROW AT A RATE NO GREATER THAN ITS___

SUSTAINABLE GROWTH RATE

WHICH OF THE FOLLOWING IS TRUE ABOUT THE SUSTAINABLE GROWTH RATE

THE MAXIMUM RATE OF GROWTH A FIRM CAN MAINTAIN WITHOUT INCREASING ITS FINANCIAL LEVERAGE