CHAPTER 4 solution

CHAPTER 4 solution - CHAPTER 4 LONG-TERM FINANCIAL PLANNING...

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CHAPTER 4 LONG-TERM FINANCIAL PLANNING AND GROWTH Answers to Concepts Review and Critical Thinking Questions 1. The reason is that, ultimately, sales are the driving force behind a business. A firm’s assets, employees, and, in fact, just about every aspect of its operations and financing exist to directly or indirectly support sales. Put differently, a firm’s future need for things like capital assets, employees, inventory, and financing are determined by its future sales level. 2. Two assumptions of the sustainable growth formula are that the company does not want to sell new equity, and that financial policy is fixed. If the company raises outside equity, or increases its debt-equity ratio it can grow at a higher rate than the sustainable growth rate. Of course the company could also grow faster than its profit margin increases, if it changes its dividend policy by increasing the retention ratio, or its total asset turnover increases. 3.
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This note was uploaded on 03/20/2011 for the course FIN 313 taught by Professor Richey,gregm during the Spring '11 term at CSU San Bernardino.

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CHAPTER 4 solution - CHAPTER 4 LONG-TERM FINANCIAL PLANNING...

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