Question 1

If a ﬁrm has the option of growing at a 10% rate versus a 7% rate, should the ﬁrm always opt for the
higher rate of growth? Explain why or why not.

Accepted Answer

The answer of If a ﬁrm has the option of...

Question 2

You are comparing the ﬁnancial statements of General Motors (an automaker) and Sears (a
department store). Provide four items that you should consider if you are attempting to compare the
future growth prospects of both ﬁrms.

Accepted Answer

The answer of You are comparing the ﬁnancial statements of...

Question 3

Provide four factors that are generally expected to increase as the projected growth rate of a ﬁrm
increases?

Accepted Answer

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Question 4

Provide three key elements of pro forma ﬁnancial statements.

Accepted Answer

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Question 5

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the
term capital intensity ratio. Provide a deﬁnition that conveys what the term means from a ﬁnance
perspective.

Accepted Answer

The answer of Consider that you are a ﬁnance manager,...

Question 6

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the
term dividend payout ratio. Provide a deﬁnition that conveys what the term means from a ﬁnance
perspective.

Accepted Answer

The answer of Consider that you are a ﬁnance manager,...

Question 7

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the
term planning horizon. Provide a deﬁnition that conveys what the term means from a ﬁnance
perspective.

Accepted Answer

The answer of Consider that you are a ﬁnance manager,...

Question 8

Provide four factors that affect and inﬂuence sales forecasts.

Accepted Answer

The answer of Provide four factors that affect and inﬂuence...

Question 9

Provide ﬁve advantages that planning can achieve.

Accepted Answer

The answer of Provide ﬁve advantages that planning can achieve....

Question 10

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the
term percentage of sales approach. Provide a deﬁnition that conveys what the term means from a
ﬁnance perspective.

Accepted Answer

The answer of Consider that you are a ﬁnance manager,...

Question 11

Why do you need to know the current level of capacity utilization when compiling a pro forma
statement?

Accepted Answer

The answer of Why do you need to know the...

Question 12

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the
term aggregation. Provide a deﬁnition that conveys what the term means from a ﬁnance
perspective.

Accepted Answer

The answer of Consider that you are a ﬁnance manager,...

Question 13

Suppose a ﬁrm calculates its EFN and ﬁnds that it is negative. What are the ﬁrm's options in this
case?

Accepted Answer

The answer of Suppose a ﬁrm calculates its EFN and...

Question 14

Why is it just as important to project the statement of ﬁnancial position as it is to project the
statement of comprehensive income?

Accepted Answer

The answer of Why is it just as important to...

Question 15

Suppose a ﬁrm calculates its external funding needs and ﬁnds that it is negative. What are the ﬁrm's
options in this case?

Accepted Answer

The answer of Suppose a ﬁrm calculates its external funding...

Question 16

What are the basic assumptions underlying the internal and the sustainable growth rates?

Accepted Answer

The answer of What are the basic assumptions underlying the...

Question 17

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the
term debt capacity. Provide a deﬁnition that conveys what the term means from a ﬁnance
perspective.

Accepted Answer

The answer of Consider that you are a ﬁnance manager,...

Question 18

Provide four factors that affect the external ﬁnancing need of a ﬁrm.

Accepted Answer

The answer of Provide four factors that affect the external...

Question 19

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the
term external ﬁnancing needed (EFN). Provide a deﬁnition that conveys what the term means from a
ﬁnance perspective.

Accepted Answer

The answer of Consider that you are a ﬁnance manager,...

Question 20

Fixed assets are often said to grow in a "stair-step" like manner. What does this mean? Why is this a
better way to explain the growth of ﬁxed assets as compared to saying that ﬁxed assets grow
proportionally with sales?

Accepted Answer

The answer of Fixed assets are often said to grow...

Quiz 4: Long-Term Financial Planning and Growth

If a ﬁrm has the option of growing at a 10% rate versus a 7% rate, should the ﬁrm always opt for the higher rate of growth? Explain why or why not.

You are comparing the ﬁnancial statements of General Motors (an automaker) and Sears (a department store). Provide four items that you should consider if you are attempting to compare the future growth prospects of both ﬁrms.

Provide four factors that are generally expected to increase as the projected growth rate of a ﬁrm increases?

Provide three key elements of pro forma ﬁnancial statements.

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the term capital intensity ratio. Provide a deﬁnition that conveys what the term means from a ﬁnance perspective.

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the term dividend payout ratio. Provide a deﬁnition that conveys what the term means from a ﬁnance perspective.

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the term planning horizon. Provide a deﬁnition that conveys what the term means from a ﬁnance perspective.

Provide four factors that affect and inﬂuence sales forecasts.

Provide ﬁve advantages that planning can achieve.

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the term percentage of sales approach. Provide a deﬁnition that conveys what the term means from a ﬁnance perspective.

Why do you need to know the current level of capacity utilization when compiling a pro forma statement?

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the term aggregation. Provide a deﬁnition that conveys what the term means from a ﬁnance perspective.

Suppose a ﬁrm calculates its EFN and ﬁnds that it is negative. What are the ﬁrm's options in this case?

Why is it just as important to project the statement of ﬁnancial position as it is to project the statement of comprehensive income?

Suppose a ﬁrm calculates its external funding needs and ﬁnds that it is negative. What are the ﬁrm's options in this case?

What are the basic assumptions underlying the internal and the sustainable growth rates?

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the term debt capacity. Provide a deﬁnition that conveys what the term means from a ﬁnance perspective.

Provide four factors that affect the external ﬁnancing need of a ﬁrm.

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the term external ﬁnancing needed (EFN). Provide a deﬁnition that conveys what the term means from a ﬁnance perspective.

Fixed assets are often said to grow in a "stair-step" like manner. What does this mean? Why is this a better way to explain the growth of ﬁxed assets as compared to saying that ﬁxed assets grow proportionally with sales?