CH04TBV7 - CHAPTER 4 Long-Term Financial Planning and...

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CHAPTER 4 Long-Term Financial Planning and Growth I. DEFINITIONS PLANNING HORIZON a 1. The long-range time period, usually the next two to five years, over which the financial planning process focuses is known as the: a. planning horizon. b. planning strategy. c. planning agenda. d. short-run. e. current financing period. AGGREGATION b 2. The process by which smaller investment proposals of each of a firm’s operational units are added up and treated as one big project is known as: a. separation. b. aggregation. c. conglomeration. d. appropriation. e. striation. PRO FORMA STATEMENTS d 3. Pro forma financial statements are: a. statements recapping the performance of a firm for the past five years. b. accounting statements filed with the Securities and Exchange Commission. c. accounting statements filed with the Internal Revenue Service. d. projected accounting statements based on a sales forecast. e. the most-recently compiled accounting statements of a firm. PLUG VARIABLE e 4. The designated source of external financing required to make a pro forma balance sheet balance is called the: a. retained earnings account. b. common stock account. c. debt-equity ratio. d. cash flow variable. e. plug variable.
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CHAPTER 4 PERCENTAGE OF SALES APPROACH a 5. The financial planning method in which accounts vary depending on a firm’s predicted sales level is called the _____ approach. a. percentage of sales b. sales dilution c. sales reconciliation d. common-size e. time-trend DIVIDEND PAYOUT RATIO c 6. The dividend payout ratio is calculated as: a. net income minus additions to retained earnings. b. cash dividends divided by the change in retained earnings. c. cash dividends divided by net income. d. net income minus cash dividends. e. one plus the retention ratio. RETENTION RATIO b 7. The retention ratio is calculated as: a. one plus the dividend payout ratio. b. the additions to retained earnings divided by net income. c. the additions to retained earnings divided by dividends paid. d. net income minus additions to retained earnings. e. net income minus cash dividends. CAPITAL INTENSITY RATIO d 8. The capital intensity ratio is calculated as: a. long-term debt multiplied by total assets. b. net fixed assets divided by net income. c. net fixed assets multiplied by total sales. d. total assets divided by total sales. e. total sales divided by total assets. INTERNAL GROWTH RATE c 9. The internal growth rate of a firm is best described as the: a. minimum growth rate achievable if the firm does not pay out any cash dividends. b. minimum growth rate achievable if the firm maintains a constant equity multiplier. c. maximum growth rate achievable without external financing of any kind. d.
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CH04TBV7 - CHAPTER 4 Long-Term Financial Planning and...

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