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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?


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

F) A) and B)
G) A) and C)

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The sustainable growth rate:


A) assumes there is no external financing of any kind.
B) assumes no additional long-term debt is available.
C) assumes the debt-equity ratio is constant.
D) assumes the debt-equity ratio is 1.0.
E) assumes all income is retained by the firm.

F) A) and C)
G) A) and B)

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-The Soccer Shoppe has a 9 percent return on assets and a 25 percent payout ratio.What is its internal growth rate? A) 4.72 percent B) 5.08 percent C) 5.49 percent D) 6.23 percent E) 7.24 percent -The Soccer Shoppe has a 9 percent return on assets and a 25 percent payout ratio.What is its internal growth rate?


A) 4.72 percent
B) 5.08 percent
C) 5.49 percent
D) 6.23 percent
E) 7.24 percent

F) C) and E)
G) B) and E)

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


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) A) and E)
G) A) and D)

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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.

F) A) and B)
G) A) and C)

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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?

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With a negative external financing need,...

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A firm's net working capital and all of its expenses vary directly with sales.The firm is operating currently at 96 percent of capacity.The firm wants no additional external financing of any kind.Which one of the following statements related to the firm's pro forma statements for next year must be correct?


A) Total liabilities will remain constant at this year's value.
B) The maximum rate of sales increase is 4 percent.
C) The firm cannot exceed its internal rate of growth.
D) The projected owners' equity will equal this year's ending equity balance.
E) Fixed assets must remain constant at the current level.

F) A) and E)
G) A) and D)

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Consider the following information for Kaleb's Kickboxing: Consider the following information for Kaleb's Kickboxing: What is the sustainable rate of growth? A) 11.87 percent B) 12.29 percent C) 12.52 percent D) 13.42 percent E) 13.58 percent What is the sustainable rate of growth?


A) 11.87 percent
B) 12.29 percent
C) 12.52 percent
D) 13.42 percent
E) 13.58 percent

F) C) and E)
G) B) and D)

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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

F) D) and E)
G) B) and E)

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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

F) A) and C)
G) B) and E)

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A Procrustes approach to financial planning is based on:


A) a policy of producing a financial plan once every five years.
B) developing a plan around the goals of senior managers.
C) a proactive approach to the economic outlook.
D) a flexible capital budget.
E) a flexible capital structure.

F) D) and E)
G) None of the above

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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

F) None of the above
G) B) and D)

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Miller Bros.Hardware is operating at full capacity with a sales level of $689,700 and fixed assets of $468,000.The profit margin is 7 percent.What is the required addition to fixed assets if sales are to increase by 10 percent?


A) $3,276
B) $4,680
C) $28,400
D) $32,760
E) $46,800

F) A) and B)
G) C) and D)

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Which one of the following capital intensity ratios indicates the largest need for fixed assets per dollar of sales?


A) 0.70
B) 0.86
C) 1.00
D) 1.06
E) 1.15

F) B) and E)
G) A) and D)

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A firm wishes to maintain an internal growth rate of 11 percent and a dividend payout ratio of 24 percent.The current profit margin is 7 percent and the firm uses no external financing sources.What must the total asset turnover rate be?


A) 0.87 times
B) 0.90 times
C) 1.01 times
D) 1.15 times
E) 1.86 times

F) A) and B)
G) B) and E)

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The Corner Store has $219,000 of sales and $193,000 of total assets.The firm is operating at 87 percent of capacity.What is the capital intensity ratio at full capacity?


A) 0.62
B) 0.68
C) 0.77
D) 1.35
E) 1.47

F) All of the above
G) A) and E)

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The most recent financial statements for Watchtower,Inc.are shown here (assuming no income taxes) : The most recent financial statements for Watchtower,Inc.are shown here (assuming no income taxes) : Assets and costs are proportional to sales.Debt and equity are not.No dividends are paid.Next year's sales are projected to be $4,750.What is the amount of the external financing needed? A) $797 B) $808 C) $811 D) $818 E) $823 Assets and costs are proportional to sales.Debt and equity are not.No dividends are paid.Next year's sales are projected to be $4,750.What is the amount of the external financing needed?


A) $797
B) $808
C) $811
D) $818
E) $823

F) C) and E)
G) A) and B)

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-The most recent financial statements for Last in Line,Inc.are shown here: Assets and costs are proportional to sales.Debt and equity are not.A dividend of $992 was paid,and the company wishes to maintain a constant payout ratio.Next year's sales are projected to be $21,830.What is the amount of the external financing need? A) $12,711 B) $13,333 C) $13,556 D) $13,809 E) $14,357 -The most recent financial statements for Last in Line,Inc.are shown here: Assets and costs are proportional to sales.Debt and equity are not.A dividend of $992 was paid,and the company wishes to maintain a constant payout ratio.Next year's sales are projected to be $21,830.What is the amount of the external financing need? A) $12,711 B) $13,333 C) $13,556 D) $13,809 E) $14,357 -The most recent financial statements for Last in Line,Inc.are shown here: -The most recent financial statements for Last in Line,Inc.are shown here: Assets and costs are proportional to sales.Debt and equity are not.A dividend of $992 was paid,and the company wishes to maintain a constant payout ratio.Next year's sales are projected to be $21,830.What is the amount of the external financing need? A) $12,711 B) $13,333 C) $13,556 D) $13,809 E) $14,357 Assets and costs are proportional to sales.Debt and equity are not.A dividend of $992 was paid,and the company wishes to maintain a constant payout ratio.Next year's sales are projected to be $21,830.What is the amount of the external financing need?


A) $12,711
B) $13,333
C) $13,556
D) $13,809
E) $14,357

F) C) and D)
G) A) and B)

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Fresno Salads has current sales of $6,000 and a profit margin of 6.5 percent.The firm estimates that sales will increase by 4 percent next year and that all costs will vary in direct relationship to sales.What is the pro forma net income?


A) $303.33
B) $327.18
C) $405.60
D) $438.70
E) $441.10

F) A) and C)
G) All of the above

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


A) avoidance of external equity financing
B) increase in corporate tax rates
C) reduction in the retention ratio
D) decrease in the dividend payout ratio
E) decrease in sales given a positive profit margin

F) A) and B)
G) B) and D)

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