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Unformatted text preview: The capital intensity ratio is the reciprocal of the total assets turnover ratio. e. Lumpy assets are those assets that cannot be acquired smoothly, but require large, discrete additions. For example, an electric utility that is operating at full capacity cannot add a small amount of generating capacity, at least not economically. 14-2 Accounts payable, accrued wages, and accrued taxes increase spontaneously and proportionately with sales. Retained earnings increase, but not proportionately. 14-3 The equation gives good forecasts of financial requirements if the ratios A * /S and L * /S, as well as M and d, are stable. Otherwise, another forecasting technique should be used. 14-5 a. +. b. +. It reduces spontaneous funds; however, it may eventually increase retained earnings. c. +. d. +....
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- Spring '08