Fin 370 - Set 7

Which of the following questions are appropriate to address upon conducting sustainable growth analysis and the financial planning process? I. Should the firm merge with a competitor? II. Should additional equity be sold? III. Should a particular division be sold? IV. Should a new product be introduced?

I, II, III, and IV

Wax Music expects sales of $437,500 next year. The profit margin is 4.8 percent and the firm has a 30 percent dividend payout ratio. What is the projected increase in retained earnings?

A. $14,700

Which of the following statements is true?

Due to required cash investments in current assets, fast-growing and profitable companies can literally "grow broke".

Which of these ratios are the determinants of a firm's sustainable growth rate? I. Assets-to-equity ratio II. Profit margin III. Retention ratio IV. Asset turnover ratio

I, II, III, and IV

The sustainable growth rate of a firm is best described as the

maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio.

The retention ratio is:

the percentage of net income available to the firm to fund future growth.

Which of the following can affect a firm's sustainable rate of growth? I. Asset turnover ratio II. Profit margin III. Dividend policy IV. Financial leverage

. I, II, III, and IV

Which one of the following correctly defines the retention ratio?

additions to retained earnings divided by net income

The sustainable growth rate:

assumes the debt-equity ratio is constant.

Which one of the following will increase the sustainable rate of growth a corporation can achieve?

decrease in the dividend payout ratio

Which one of the following policies most directly affects the projection of the retained earnings balance to be used on a pro forma statement?

dividend policy