Corporate Finance

Topics: Generally Accepted Accounting Principles, Financial ratios, Balance sheet Pages: 84 (12388 words) Published: September 20, 2013
Chapter 04
Long-Term Financial Planning and Growth
 

Multiple Choice Questions
 
1. Phil is working on a financial plan for the next three years. This time period is referred to as which one of the following?  A. financial range
B. planning horizon
C. planning agenda
D. short-run
E. current financing period
 
2. 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?  A. conjoining

B. aggregation
C. conglomeration
D. appropriation
E. summation
 
3. 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?  A. percentage of sales method

B. sales dilution method
C. sales reconciliation method
D. common-size method
E. trend method
 
4. Which one of the following terms is defined as dividends paid expressed as a percentage of net income?  A. dividend retention ratio
B. dividend yield
C. dividend payout ratio
D. dividend portion
E. dividend section
 
5. Which one of the following correctly defines the retention ratio?  A. one plus the dividend payout ratio
B. addition to retained earnings divided by net income
C. addition to retained earnings divided by dividends paid
D. net income minus additions to retained earnings
E. net income minus cash dividends
 
6. Which one of the following ratios identifies the amount of assets a firm needs in order to generate $1 in sales?  A. current ratio
B. equity multiplier
C. retention ratio
D. capital intensity ratio
E. payout ratio
 
7. The internal growth rate of a firm is best described as the:  A. minimum growth rate achievable assuming a 100 percent retention ratio. B. minimum growth rate achievable if the firm maintains a constant equity multiplier. C. maximum growth rate achievable excluding external financing of any kind. D. maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio. E. maximum growth rate achievable with unlimited debt financing.  

8. The sustainable growth rate of a firm is best described as the:  A. minimum growth rate achievable assuming a 100 percent retention ratio. B. minimum growth rate achievable if the firm maintains a constant equity multiplier. C. maximum growth rate achievable excluding external financing of any kind. D. maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio. E. maximum growth rate achievable with unlimited debt financing.  

9. You are developing a financial plan for a corporation. Which of the following questions will be considered as you develop this plan? I. How much net working capital will be needed?
II. Will additional fixed assets be required?
III. Will dividends be paid to shareholders?
IV. How much new debt must be obtained? 
A. I and IV only
B. II and III only
C. I, III, and IV only
D. II, III, and IV only
E. I, II, III, and IV
 
10. Financial planning: 
A. focuses solely on the short-term outlook for a firm.
B. is a process that firms employ only when major changes to a firm's operations are anticipated. C. is a process that firms undergo once every five years.
D. considers multiple options and scenarios for the next two to five years. E. provides minimal benefits for firms that are highly responsive to economic changes.  
11. Financial planning accomplishes which of the following for a firm? I. determination of asset requirements
II. development of plans to contend with unexpected events
III. establishment of priorities
IV. analysis of funding options 
A. I and III only
B. II and IV only
C. I, III, and IV only
D. I, II, and III only
E. I, II, III, and IV
 
12. Which of the following questions are appropriate to address during the financial planning process? I....
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