FIS 480 EXAM 2 QUESTIONS AND ANSWERS A+ GRADED
What does an AFN equation forecast?
the additional financing needed by the operating plan
How does sales growth affect the AFN equation?
the higher g is, the larger AFN will be
How does the capital intensity ratio affect the AFN equation?
the higher the CIR, the larger the AFN will be
How does the spontaneous-liabilities-to-sales ratio affect the AFN equation?
the higher the firm's SL, the smaller the AFN will be
How does the profit margin affect the AFN equation?
the higher the profit margin, the smaller the AFN will be
How does the payout ratio affect the AFN equation?
the lower the PR, the smaller the AFN will be
what is the self supporting growth rate?
the maximum growth rate the firm could achieve if it had no access to external capital
How does a firm's capital intensity ratio affect the self supporting growth rate?
the. more assets the firm requires to achieve a certain level of sales, the lower its
sustainable growth rate will be
What are the determinants of a company's WACC?
YTM/coupon rate/debt RRR, tax rate, short-term debt RRR (notes payable), preferred
stock RRR, common stock RRR, weights of each rate (capital structure)
What does the FCF model estimate?
the total value of the firm
when can the constant dividend growth model be used?
only when dividend growth is constant (IF G IS NOT LESS THAN R, THE COMPANY IS
NOT IN ITS CONSTANT GROWTH PHASE)
what does the market multiple method estimate?
a company's target value
What does an AFN equation forecast?
the additional financing needed by the operating plan
How does sales growth affect the AFN equation?
the higher g is, the larger AFN will be
How does the capital intensity ratio affect the AFN equation?
the higher the CIR, the larger the AFN will be
How does the spontaneous-liabilities-to-sales ratio affect the AFN equation?
the higher the firm's SL, the smaller the AFN will be
How does the profit margin affect the AFN equation?
the higher the profit margin, the smaller the AFN will be
How does the payout ratio affect the AFN equation?
the lower the PR, the smaller the AFN will be
what is the self supporting growth rate?
the maximum growth rate the firm could achieve if it had no access to external capital
How does a firm's capital intensity ratio affect the self supporting growth rate?
the. more assets the firm requires to achieve a certain level of sales, the lower its
sustainable growth rate will be
What are the determinants of a company's WACC?
YTM/coupon rate/debt RRR, tax rate, short-term debt RRR (notes payable), preferred
stock RRR, common stock RRR, weights of each rate (capital structure)
What does the FCF model estimate?
the total value of the firm
when can the constant dividend growth model be used?
only when dividend growth is constant (IF G IS NOT LESS THAN R, THE COMPANY IS
NOT IN ITS CONSTANT GROWTH PHASE)
what does the market multiple method estimate?
a company's target value
