Question 1

Consider the following information for Kaleb's Kickboxing:  What is the sustainable rate of growth?

Accepted Answer

A)  13.87 percent
B)  14.29 percent
C)  14.65 percent
D)  15.42 percent
E)  15.58 percentF) A) and B)
G) C) and D)

Question 2

Stop and Go has a 4.5 percent profit margin and a 15 percent dividend payout ratio. The total asset turnover is 1.6 and the debt-equity ratio is 0.60. What is the sustainable rate of growth?

Accepted Answer

A)  9.13 percent
B)  9.54 percent
C)  9.89 percent
D)  10.26 percent
E)  10.85 percentF) C) and D)
G) A) and D)

Question 3

Hungry Howie's is currently operating at 82 percent of capacity. What is the total asset turnover ratio at full capacity?

Accepted Answer

A)  .68
B)  .78
C)  .95
D)  1.29
E)  1.46F) A) and C)
G) B) and E)

Question 4

Assume that Fake Stone, Inc. is operating at full capacity. Also assume that all costs, net working capital, and fixed assets vary directly with sales. The debt-equity ratio and the dividend payout ratio are constant. What is the pro forma net fixed asset value for next year if sales are projected to increase by 7.5 percent?

Accepted Answer

A)  $19,800
B)  $21,070
C)  $23,600
D)  $24,240
E)  $26,810F) D) and E)
G) B) and C)

Question 5

Major Manuscripts, Inc. does not want to incur any additional external financing. The dividend payout ratio is constant. What is the firm's maximum rate of growth?

Accepted Answer

A)  7.44 percent
B)  7.78 percent
C)  9.26 percent
D)  9.75 percent
E)  10.90 percentF) A) and B)
G) B) and D)

Question 6

All else constant, which one of the following will increase the internal rate of growth?

Accepted Answer

A)  decrease in the retention ratio
B)  decrease in net income
C)  increase in the dividend payout ratio
D)  decrease in total assets
E)  increase in costs of goods soldF) A) and B)
G) A) and D)

Question 7

Major Manuscripts, Inc. is currently operating at maximum capacity. All costs, assets, and current liabilities vary directly with sales. The tax rate and the dividend payout ratio will remain constant. How much additional debt is required if no new equity is raised and sales are projected to increase by 8 percent?

Accepted Answer

A)  -$157
B)  -$68
C)  $241
D)  $348
E)  $367F) B) and E)
G) D) and E)

Question 8

Designer's Outlet has a capital intensity ratio of 0.87 at full capacity. Currently, total assets are $48,900 and current sales are $52,300. At what level of capacity is the firm currently operating?

Accepted Answer

A)  89 percent
B)  91 percent
C)  93 percent
D)  96 percent
E)  98 percentF) A) and B)
G) C) and D)

Question 9

Country Comfort, Inc. had equity of $150,000 at the beginning of the year. At the end of the year, the company had total assets of $195,000. During the year, the company sold no new equity. Net income for the year was $72,000 and dividends were $44,640. What is the sustainable growth rate?

Accepted Answer

A)  15.32 percent
B)  15.79 percent
C)  17.78 percent
D)  18.01 percent
E)  18.24 percentF) C) and E)
G) B) and E)

Question 10

Based on the following information, what is the sustainable growth rate of Hendrix Guitars, Inc.?

Accepted Answer

A)  7.68 percent
B)  9.52 percent
C)  11.12 percent
D)  13.49 percent
E)  14.41 percentF) All of the above
G) A) and D)

Question 11

The Cookie Shoppe 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?

Accepted Answer

A)  $14,700
B)  $17,500
C)  $18,300
D)  $20,600
E)  $21,000F) A) and E)
G) B) and C)

Question 12

When constructing a pro forma statement, net working capital generally:

Accepted Answer

A)  remains fixed.
B)  varies only if the firm is currently producing at full capacity.
C)  varies only if the firm maintains a fixed debt-equity ratio.
D)  varies only if the firm is producing at less than full capacity.
E)  varies proportionally with sales.F) B) and D)
G) B) and E)

Question 13

Identify the four primary determinants of a firm's growth and explain how each factor could either add to or limit the growth potential of a firm.

Accepted Answer

The four f...

Question 14

Which one of the following is correct in relation to pro forma statements?

Accepted Answer

A)  Fixed assets must increase if sales are projected to increase.
B)  Net working capital is affected only when a firm's sales are expected to exceed the firm's current production capacity.
C)  The addition to retained earnings is equal to net income plus dividends paid.
D)  Long-term debt varies directly with sales when a firm is currently operating at maximum capacity.
E)  Inventory changes are directly proportional to sales changes.F) B) and E)
G) C) and D)

Question 15

Monika's Dinor is operating at 94 percent of its fixed asset capacity and has current sales of $611,000. How much can the firm grow before any new fixed assets are needed?

Accepted Answer

A)  4.99 percent
B)  5.78 percent
C)  6.02 percent
D)  6.38 percent
E)  6.79 percentF) A) and B)
G) A) and C)

Question 16

The most recent financial statements for Benatar Co. are shown here:  Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 40 percent dividend payout ratio. No external equity financing is possible. What is the internal growth rate?

Accepted Answer

A)  2.91 percent
B)  3.44 percent
C)  3.87 percent
D)  4.02 percent
E)  4.14 percentF) A) and B)
G) B) and E)

Question 17

Hungry Howie's is currently operating at 94 percent of capacity. What is the required increase in fixed assets if sales are projected to increase by 14 percent?

Accepted Answer

A)  $0
B)  $511
C)  $633
D)  $708
E)  $777F) A) and D)
G) C) and D)

Question 18

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:

Accepted Answer

A)  is projected to grow at the internal rate of growth.
B)  is projected to grow at the sustainable rate of growth.
C)  currently has excess capacity.
D)  is currently operating at full capacity.
E)  retains all of its net income.F) B) and C)
G) C) and D)

Question 19

Sal's Pizza has a dividend payout ratio of 10 percent. The firm does not want to issue additional equity shares but does want to maintain its current debt-equity ratio and its current dividend policy. The firm is profitable. Which one of the following defines the maximum rate at which this firm can grow?

Accepted Answer

A)  internal growth rate * (1 - 0.10) 
B)  sustainable growth rate* (1 - 0.10) 
C)  internal growth rate
D)  sustainable growth rate
E)  zero percentF) A) and E)
G) A) and D)

Question 20

Nelson's Landscaping Services just completed a pro forma statement using the percentage of sales approach. The pro forma has a projected external financing need of -$5,500. What are the firm's options in this case?

Accepted Answer

With a negative external financing need,...

Exam 4: Long-Term Financial Planning and Growth

Correct Answer
verified

Identify the four primary determinants of a firm's growth and explain how each factor could either add to or limit the growth potential of a firm.

Correct Answer
verified
The four f...
View Answer

All else constant, which one of the following will increase the internal rate of growth?

Correct Answer
verified

Hungry Howie's is currently operating at 94 percent of capacity. What is the required increase in fixed assets if sales are projected to increase by 14 percent?

Correct Answer
verified

Consider the following information for Kaleb's Kickboxing: What is the sustainable rate of growth?

Correct Answer
verified

Monika's Dinor is operating at 94 percent of its fixed asset capacity and has current sales of $611,000. How much can the firm grow before any new fixed assets are needed?

Correct Answer
verified

The most recent financial statements for Benatar Co. are shown here: Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 40 percent dividend payout ratio. No external equity financing is possible. What is the internal growth rate?

Correct Answer
verified

Designer's Outlet has a capital intensity ratio of 0.87 at full capacity. Currently, total assets are $48,900 and current sales are $52,300. At what level of capacity is the firm currently operating?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Based on the following information, what is the sustainable growth rate of Hendrix Guitars, Inc.?

Correct Answer
verified

Nelson's Landscaping Services just completed a pro forma statement using the percentage of sales approach. The pro forma has a projected external financing need of -$5,500. What are the firm's options in this case?

Correct Answer
verified
With a negative external financing need,...
View Answer

When constructing a pro forma statement, net working capital generally:

Correct Answer
verified

Stop and Go has a 4.5 percent profit margin and a 15 percent dividend payout ratio. The total asset turnover is 1.6 and the debt-equity ratio is 0.60. What is the sustainable rate of growth?

Correct Answer
verified

Country Comfort, Inc. had equity of $150,000 at the beginning of the year. At the end of the year, the company had total assets of $195,000. During the year, the company sold no new equity. Net income for the year was $72,000 and dividends were $44,640. What is the sustainable growth rate?

Correct Answer
verified

Which one of the following is correct in relation to pro forma statements?

Correct Answer
verified

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
verified

Hungry Howie's is currently operating at 82 percent of capacity. What is the total asset turnover ratio at full capacity?

Correct Answer
verified

The Cookie Shoppe 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?

Correct Answer
verified

Major Manuscripts, Inc. does not want to incur any additional external financing. The dividend payout ratio is constant. What is the firm's maximum rate of growth?

Correct Answer
verified

Exam 4: Long-Term Financial Planning and Growth

Correct AnswerverifiedShow Answer

Identify the four primary determinants of a firm's growth and explain how each factor could either add to or limit the growth potential of a firm.

Correct AnswerverifiedThe four f...View AnswerShow Answer

All else constant, which one of the following will increase the internal rate of growth?

Correct AnswerverifiedShow Answer

Hungry Howie's is currently operating at 94 percent of capacity. What is the required increase in fixed assets if sales are projected to increase by 14 percent?

Correct AnswerverifiedShow Answer

Consider the following information for Kaleb's Kickboxing: What is the sustainable rate of growth?

Correct AnswerverifiedShow Answer

Monika's Dinor is operating at 94 percent of its fixed asset capacity and has current sales of $611,000. How much can the firm grow before any new fixed assets are needed?

Correct AnswerverifiedShow Answer

The most recent financial statements for Benatar Co. are shown here: Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 40 percent dividend payout ratio. No external equity financing is possible. What is the internal growth rate?

Correct AnswerverifiedShow Answer

Designer's Outlet has a capital intensity ratio of 0.87 at full capacity. Currently, total assets are $48,900 and current sales are $52,300. At what level of capacity is the firm currently operating?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Based on the following information, what is the sustainable growth rate of Hendrix Guitars, Inc.?

Correct AnswerverifiedShow Answer

Nelson's Landscaping Services just completed a pro forma statement using the percentage of sales approach. The pro forma has a projected external financing need of -$5,500. What are the firm's options in this case?

Correct AnswerverifiedWith a negative external financing need,...View AnswerShow Answer

When constructing a pro forma statement, net working capital generally:

Correct AnswerverifiedShow Answer

Stop and Go has a 4.5 percent profit margin and a 15 percent dividend payout ratio. The total asset turnover is 1.6 and the debt-equity ratio is 0.60. What is the sustainable rate of growth?

Correct AnswerverifiedShow Answer

Country Comfort, Inc. had equity of $150,000 at the beginning of the year. At the end of the year, the company had total assets of $195,000. During the year, the company sold no new equity. Net income for the year was $72,000 and dividends were $44,640. What is the sustainable growth rate?

Correct AnswerverifiedShow Answer

Which one of the following is correct in relation to pro forma statements?

Correct AnswerverifiedShow Answer

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 AnswerverifiedShow Answer

Hungry Howie's is currently operating at 82 percent of capacity. What is the total asset turnover ratio at full capacity?

Correct AnswerverifiedShow Answer

The Cookie Shoppe 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?

Correct AnswerverifiedShow Answer

Major Manuscripts, Inc. does not want to incur any additional external financing. The dividend payout ratio is constant. What is the firm's maximum rate of growth?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The four f...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
With a negative external financing need,...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified