Chap004PracticeSolns

Chap004PracticeSolns - Chapter 04 - Long-Term Financial...

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Chapter 04 - Long-Term Financial Planning and Growth 1. You are developing a financial plan for a corporation. Which of the following questions will be considered as you develop this plan? I. How much net working capital will be needed? II. Will additional fixed assets be required? III. Will dividends be paid to shareholders? IV. How much new debt must be obtained? A. I and IV only B. II and III only C. I, III, and IV only D. II, III, and IV only E. I, II, III, and IV 2. Financial planning accomplishes which of the following for a firm? I. determination of asset requirements II. development of plans to contend with unexpected events III. establishment of priorities IV. analysis of funding options A. I and III only B. II and IV only C. I, III, and IV only D. I, II, and III only E. I, II, III, and IV 3. Which of the following questions are appropriate to address during the financial planning process? I. Should the firm merge with a competitor? II. Should additional shares of stock be sold? III. Should a particular division be sold? IV. Should a new product be introduced? A. I, II, and III only B. I, II, and IV only C. I, III, and IV only D. II, III, and IV only E. I, II, III, and IV 4. You are getting ready to prepare pro forma statements for your business. Which one of the following are you most apt to estimate first as you begin this process? A. fixed assets B. current expenses C. sales forecast D. projected net income E. external financing need 4-1
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Chapter 04 - Long-Term Financial Planning and Growth 5. Which one of the following statements is correct? A. Pro forma statements must assume that no new equity is issued. B. Pro forma statements are projections, not guarantees. C. Pro forma statements are limited to a balance sheet and income statement. D. Pro forma financial statements must assume that no dividends will be paid. E. Net working capital needs are excluded from pro forma computations. 6. Which one of the following is correct in relation to pro forma statements? A. Fixed assets must increase if sales are projected to increase. B. Net working capital is affected only when a firm's sales are expected to exceed the firm's current production capacity. C. The addition to retained earnings is equal to net income plus dividends paid. D. Long-term debt varies directly with sales when a firm is currently operating at maximum capacity. E. Inventory changes are directly proportional to sales changes. 7. When constructing a pro forma statement, net working capital generally: A. remains fixed. B. varies only if the firm is currently producing at full capacity. C. varies only if the firm maintains a fixed debt-equity ratio. D. varies only if the firm is producing at less than full capacity.
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Chap004PracticeSolns - Chapter 04 - Long-Term Financial...

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