Chapter 17-Web Appendix 17A Solutions

Chapter 17-Web Appendix 17A Solutions - WebAppendix17A...

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Web Appendix 17A Forecasting Financial Requirements When Financial  Ratios Change Answers to Questions 17A-1 If economies of scale exist, increases in sales require proportionally lesser increases in assets.  With economies of scale, ratios are likely to change over time (and to decrease) as the size of the  firm increases.  (Refer to panel b of Figure 17A-1.) 17A-2 If a firm’s business model consists of relatively few fixed asset investments, then the firm is more  likely to encounter a lumpy assets problem.  In many industries, technological considerations dictate  that if a firm is to be competitive, it must add fixed assets in large, discrete units.  (Refer to panel d  of Figure 17A-1.) 17A-3 Because a firm is operating at capacity, even a small increase in sales would require an increase in 
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