Lecture 2

Lecture 2 - LECTURE 2 Long-Term Financial Planning and...

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LECTURE 2 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. Illegal. b. Accounting statements filed with the Securities and Exchange Commission (SEC). c. Accounting statements filed with the Internal Revenue Service (IRS). d. Projected accounting statements based on a sales forecast assumption. e. The most-recently compiled accounting statements of the firm released to the public. PLUG VARIABLE e 4. The designated source(s) of external financing required to make the 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 are varied depending on a firm’s predicted sales level is called the: a. Percentage of sales approach. b. Sales dilution approach. c. Sales reconciliation approach. d. Common-size approach. e. Time-trend approach. DIVIDEND PAYOUT RATIO c 6. The dividend payout financial ratio is calculated as: a. Net income minus additions to retained earnings. b. Cash dividends divided by shares outstanding. 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. Additions to retained earnings divided by net income. c. Additions to retained earnings divided by shares outstanding. 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 times total assets. b. Net fixed assets divided by credit sales. c. Net fixed assets times 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: a. The minimum growth rate achievable if the firm does not pay out any cash dividends. b. The minimum growth rate achievable if the firm maintains a constant equity multiplier. c. The maximum growth rate achievable without external financing of any kind. d.
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Lecture 2 - LECTURE 2 Long-Term Financial Planning and...

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