Question 1

Consider a ﬁrm which forecasts that costs, assets, and current liabilities will all change
proportionately with sales and the dividend payout ratio will remain ﬁxed. How will the ﬁrm's ROE
change as a result of a forecast 30% increase in sales? How will the individual components of ROE
(the Du Pont identity) change? Why?

Accepted Answer

The answer of Consider a ﬁrm which forecasts that costs,...

Question 2

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the
term sustainable growth rate (SGR). 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 3

State the assumptions that underlie the sustainable growth rate and interpret what the sustainable
growth rate means.

Accepted Answer

The answer of State the assumptions that underlie the sustainable...

Question 4

Provide four factors that impact a ﬁrm's ability to sustain its growth.

Accepted Answer

The answer of Provide four factors that impact a ﬁrm's...

Question 5

Why is it important for managers to understand the importance of both the internal and the
sustainable rates of growth?

Accepted Answer

The answer of Why is it important for managers to...

Question 6

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the
term retention ratio or plowback 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

In general, would ﬁrms tend to follow the internal rate of growth or the sustainable rate of growth?
Explain the reasoning behind your answer.

Accepted Answer

The answer of In general, would ﬁrms tend to follow...

Question 8

It is stated in the text that the planner's assumptions about future sales growth serves as the "driver"
for the ﬁnancial plan. What factors and/or types of decisions determine how much sales growth the
ﬁrm can accommodate?

Accepted Answer

The answer of It is stated in the text that...

Question 9

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the
term internal growth rate. 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,...

Quiz 4: Long-Term Financial Planning and Growth

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the term sustainable growth rate (SGR). Provide a deﬁnition that conveys what the term means from a ﬁnance perspective.

State the assumptions that underlie the sustainable growth rate and interpret what the sustainable growth rate means.

Provide four factors that impact a ﬁrm's ability to sustain its growth.

Why is it important for managers to understand the importance of both the internal and the sustainable rates of growth?

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

In general, would ﬁrms tend to follow the internal rate of growth or the sustainable rate of growth? Explain the reasoning behind your answer.

It is stated in the text that the planner's assumptions about future sales growth serves as the "driver" for the ﬁnancial plan. What factors and/or types of decisions determine how much sales growth the ﬁrm can accommodate?

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