FIN534assignchap12Hard

FIN534assignchap12Hard - Chapter 12 1 Which of the...

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Chapter 12 1. Which of the following statements is CORRECT? a. Perhaps the most important step when developing forecasted financial statements is to determine the breakdown of common equity between common stock and retained earnings. b. The first, and perhaps the most critical, step in forecasting financial requirements is to forecast future sales. c. Forecasted financial statements, as discussed in the text, are used primarily as a part of the managerial compensation program, where management’s historical performance is evaluated. d. The capital intensity ratio gives us an idea of the physical condition of the firm’s fixed assets. e. The AFN equation produces more accurate forecasts than the forecasted financial statement method, especially if fixed assets are lumpy, economies of scale exist, or if excess capacity exists. 2. Which of the following statements is CORRECT? a. The sustainable growth rate is the maximum achievable growth rate without the firm having to raise external funds. In other words, it is the growth rate at which the firm's AFN equals zero. b. If a firm’s assets are growing at a positive rate, but its retained earnings are not increasing,
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This note was uploaded on 03/07/2012 for the course FIN 534 taught by Professor Nalla during the Spring '08 term at Strayer.

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FIN534assignchap12Hard - Chapter 12 1 Which of the...

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