Q14 - University of Houston-Victoria FIN 6352 Financial...

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Financial Management FMQuiz14 Dr. Xavier Garza Gómez University of Houston-Victoria (Extra Credit) FIN 6352 Financial Management Review Quiz for Chapter 14 - Financial Planning True-False 1. Any firm with a positive growth rate in sales will require some amount of external fund- ing, assuming all existing ratios are to be maintained. a. True b. False 2. The fact that long-term debt and equity funds are raised infrequently and in large amounts lessens the need for the firm to forecast them on a continual basis. a. True b. False 3. The percentage of sales method assumes that all financial ratios are constant, which means, for example, that if you plotted a graph of inventories versus sales, the regression line would be linear and would have a positive Y-intercept. a. True b. False Multiple Choice: Concepts 4. The percentage of sales method produces accurate results unless which of the following conditions is (are) present? a. Fixed assets are "lumpy." b. Strong economies of scale are present. c. Excess capacity exists because of a temporary recession. d. Answers a, b, and c all make the percentage of sales method inaccurate. e. Answers a and c make the percentage of sales method inaccurate, but, as the text ex- plains, the assumption of increasing economies of scale is built into the percentage of sales method. 5. A company is forecasting an increase in sales and is using the AFN model to forecast the additional capital that they need to raise. Which of the following factors are likely to in- crease the additional funds needed (AFN)? a. The company has a lot of excess capacity. b. The company has a high dividend payout ratio. c. The company has a lot of spontaneous liabilities that increase as sales increase. d.
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This note was uploaded on 11/23/2008 for the course FIN 6352 taught by Professor Gomez during the Spring '08 term at TAMU Intl..

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Q14 - University of Houston-Victoria FIN 6352 Financial...

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