Chapter 4 Long-Term Financial Planning and Growth

Net income = ($367,400 − 183,600 − 48,600 − 39,200)(1 − .21)
Net income = $75,840

Total equity = $328,700 − 62,400 − 76,300
Total equity = $190,000

ROE = $75,840/$190,000
ROE = .3992, or 39.92%
126) D
Fixed asset turnover = ($62,300/.067)/($1,100,500 − 328,200)
Fixed asset turnover = $1.20

For every $1 in net fixed assets, the firm generates $1.20 in sales.
127) C
Credit sales = .66($161,000/.076)
Credit sales = $1,398,158

Days' sales in receivables = 365/($1,398,158/$127,100)
Days' sales in receivables = 33.18 days


Student name:
1) The Green Giant has a 5 percent profit margin and a 36 percent dividend payout ratio.
The total asset turnover is 1.4 times and the equity multiplier is 1.4 times. What is the sustainable
rate of growth?
1)


A) 14.11%
B) 9.80%
C) 9.37%
D) 1.96%
E) 6.69%

,Question Details
AACSB : Analytical Thinking
Difficulty : 1 Basic
Topic : Internal and sustainable growth rates
Bloom's : Understand
Learning Objective : 04-03 Name the determinants of a firm's growth.
Section : 4.4 External Financing and Growth
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible




2) A firm wants a sustainable growth rate of 3.23 percent while maintaining a dividend
payout ratio of 29 percent and a profit margin of 8 percent. The firm has a capital intensity ratio
of 2. What is the debt-equity ratio that is required to achieve the firm's desired rate of growth?
2)


A) .55times
B) .90times
C) .21times
D) .71times
E) .10 times



Question Details
AACSB : Analytical Thinking
Difficulty : 1 Basic
Topic : Internal and sustainable growth rates
Bloom's : Understand
Learning Objective : 04-03 Name the determinants of a firm's growth.
Section : 4.4 External Financing and Growth
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible




3) Selio Home Services combines the investment proposals from each operational unit into
one single project for planning purposes. This process is referred to as:
3)

, A) conjoining.
B) aggregation.
C) conglomeration.
D) appropriation.
E) summation.



Question Details
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Difficulty : 1 Basic
Learning Objective : 04-01 Apply the percentage of sales method.
Section : 4.1 What Is Financial Planning?
Topic : Financial planning basics
AACSB : Reflective Thinking
Bloom's : Remember




4) Which of the following questions should be considered when developing a corporation’s
financial plan?
1.I. How much net working capital will be needed?
2.II. Will additional fixed assets be required?
3.III. Will dividends be paid to shareholders?
4.IV. How much new debt must be obtained?


4)


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

, Question Details
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Learning Objective : 04-01 Apply the percentage of sales method.
Section : 4.1 What Is Financial Planning?
Topic : Financial planning basics
Difficulty : 2 Intermediate
AACSB : Reflective Thinking
Bloom's : Understand




5) Financial planning:
5)


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.
E) provides minimal benefits for firms that are highly responsive to economic changes.



Question Details
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Difficulty : 1 Basic
Learning Objective : 04-01 Apply the percentage of sales method.
Section : 4.1 What Is Financial Planning?
Topic : Financial planning basics
AACSB : Reflective Thinking
Bloom's : Remember




6) The financial planning process includes:
1.I. determining asset requirements.
2.II. developing contingency plans.
3.III. establishing priorities.
4.IV. analyzing funding options.