Question 1

Delta Mfg. is currently operating at full capacity. The ﬁrm has sales of $89,600, current assets of $32,000, current liabilities of $23,600, net ﬁxed assets of $41,500, and a 5% proﬁt margin. The ﬁrm
Has no long-term debt and does not plan on acquiring any. The ﬁrm does not pay any dividends.
Sales are expected to increase by 5% next year. If all assets, current liabilities, and costs vary
Directly with sales, how much additional equity ﬁnancing is required for next year?

Accepted Answer

The answer of Delta Mfg. is currently operating at full...

Question 2

Suppliers, Inc. has current sales of $2,400 and a proﬁt margin of 9%. The ﬁrm estimates that sales will decrease by 4% next year and that all costs will vary in direct relationship to sales. What is the
Pro forma net income?

Accepted Answer

The current sales are $2,400 with a profit margin of 9%, resulting in a current net income of $216. With a 4% decrease in sales, the new sales figure is $2,304. Applying the 9% profit margin to the new sales gives a pro forma net income of $207.36.

Question 3

What is the addition to retained earnings if Stansﬁeld grows at the internal growth rate? (Assume the dividend payout ratio is ﬁxed.)

Accepted Answer

The internal growth rate formula is (ROA x b)/(1 - ROA x b), where ROA is return on assets and b is the retention rate. In this case, ROA is 9% and the dividend payout ratio is fixed. Therefore, the retention rate is (1 - dividend payout ratio) = 0.6. Plugging these numbers into the formula, we get (0.09 x 0.6) / (1 - 0.09 x 0.6) = 0.054, or 5.4%. The addition to retained earnings is the internal growth rate multiplied by the beginning retained earnings balance of $430 million, which equals $23.3 million (0.054 x $430 million = $23.3 million). Therefore, the best answer is C.

Question 4

Calculate cash given the following information. Total current assets $57,000; supplies $4,000; average collection period 60.83 days; days' sales in inventory 97.33 days; sales 90,000; cost of
Goods sold 75,000.

Accepted Answer

The answer of Calculate cash given the following information. Total...

Question 5

A ﬁrm currently has sales of $1.32 million and $964,500 in ﬁxed assets. Currently operations are at 84% of capacity. By how much can sales increase without requiring the ﬁrm to purchase any
Additional ﬁxed assets?(Enter values in dollars)

Accepted Answer

The answer of A ﬁrm currently has sales of $1.32...

Question 6

Consultants, Inc. is currently operating at 95% of capacity. What is the required increase in ﬁxed assets if sales are projected to increase by 10%?

Accepted Answer

The answer of 
  Consultants, Inc. is currently operating...

Question 7

Assume Stansﬁeld Corporation is operating at full capacity. What will total assets be if sales increase by 10%? Assume costs, current liabilities, and current assets vary directly with sales and
That the dividend payout ratio remains unchanged.

Accepted Answer

The answer of 
 Assume Stansﬁeld Corporation is operating at...

Question 8

What is the pro forma retained earnings if Delalo, Inc. grows at a rate of 3.76% and both the proﬁt margin and the dividend payout ratio remain constant?

Accepted Answer

The answer of 
  What is the pro forma...

Question 9

Assume costs, accounts payable, and current assets all increase at the same rate as sales. Also assume 80% of net income is paid out in dividends and that the ﬁrm is currently operating at 90% of
Capacity. If sales grow at 25%, compute external ﬁnancing needed.

Accepted Answer

The answer of Assume costs, accounts payable, and current assets...

Question 10

The following balance sheet and income statement should be used:   Assume that Taylor, Inc. is operating at full capacity. Also assume that all costs, net working capital, and ﬁxed assets vary directly with sales. The debt-equity ratio and the dividend payout ratio are
Constant. What is the projected increase in total assets if sales are projected to increase by 25%?

Accepted Answer

The answer of The following balance sheet and income statement...

Question 11

Given the following information: sales = $450, costs = $350, tax rate = 34%, retention ratio = 30%, production = 95% of capacity, sales increase = 10%. What is the expected addition to retained
Earnings? (Assume costs change directly with sales.)

Accepted Answer

The expected addition to retained earnings is $21.78. This is calculated as follows:Sales increase = 10% of $450 = $45New sales = $450 + $45 = $495New costs = 95% of $495 = $470.25Taxable income = $495 - $470.25 = $24.75Taxes = 34% of $24.75 = $8.44Net income = $24.75 - $8.44 = $16.31Retention ratio = 30%Expected addition to retained earnings = 30% of $16.31 = $21.78

Question 12

A Victoria ﬁrm currently has $1,800 in sales and is operating at 60 percent of the ﬁrm's capacity. What is the full capacity level of sales?

Accepted Answer

To find the full capacity level of sales, we need to divide the current sales by the capacity utilization rate:

Full capacity level of sales = Current sales ÷ Capacity utilization rate
Full capacity level of sales = $1,800 ÷ 0.60
Full capacity level of sales = $3,000

Therefore, the correct answer is D) $3,000.

Question 13

Assume Stansﬁeld Corporation is utilizing its ﬁxed assets at 90% capacity. Assume costs, current liabilities, and current assets vary directly with sales, and that the dividend payout ratio remains
Unchanged. If sales increase by 20%, what will total ﬁxed assets be?

Accepted Answer

The answer of 
 Assume Stansﬁeld Corporation is utilizing its...

Question 14

Assets, accounts payable and costs are proportional to sales. Debt and equity are not. The sales of Douglass Enterprises are expected to increase by 10% next year. The debt-equity ratio
And the dividend payout ratio are to be held constant. Currently the ﬁrm is producing at 88% of
Capacity. What is the required increase in net ﬁxed assets?

Accepted Answer

The answer of 
 Assets, accounts payable and costs are...

Question 15

Kurt's Adventures is operating at full capacity with a sales level of $1,200 and ﬁxed assets of $900. What is the required addition to ﬁxed assets if sales are to increase by 20 percent?

Accepted Answer

The answer of Kurt's Adventures is operating at full capacity...

Question 16

Rondolo, Inc. is currently operating at maximum capacity. All costs, assets, and current liabilities vary directly with sales. The tax rate and the dividend payout ratio will remain constant. How much
Additional debt is required if no new equity is raised and sales are projected to increase by 4% ($ in
Millions)?

Accepted Answer

The answer of 
 Rondolo, Inc. is currently operating at...

Question 17

Andrew's Specialty Store has sales of $200,000, net income of $18,500, total assets of $300,000, and total equity of $250,000. The ﬁrm paid $7,400 in dividends and maintains a constant dividend
Payout ratio. Currently, they are operating at full capacity. All costs and assets vary directly with
Sales. The ﬁrm does not want to obtain any additional external equity. At the sustainable rate of
Growth, how much new total debt must the ﬁrm acquire?

Accepted Answer

The sustainable rate of growth can be calculated as:
Sustainable rate of growth = (Net Income / Total Assets) * (1 - Dividend Payout Ratio)

Plugging in the given values, we get:
Sustainable rate of growth = (18,500 / 300,000) * (1 - 7,400 / 200,000) = 0.0483 or 4.83%

To maintain this growth rate, the firm needs to acquire new debt in such a way that the Debt-to-Total Assets ratio remains constant. This can be calculated as:

New Debt = (Sustainable Growth Rate * Total Assets) - Total Equity
New Debt = (0.0483 * $300,000) - $250,000 = $2,323

Therefore, the best choice would be C, as the firm needs to acquire $2,323 of new debt to maintain its sustainable rate of growth without obtaining any additional external equity.

Question 18

Creative Analysis, Inc. is currently operating at 70 percent of capacity. All costs and net working capital vary directly with sales. The tax rate, the proﬁt margin, and the dividend payout ratio will
Remain constant. How much additional debt is required if no new equity is raised and sales are
Projected to increase by 10%?

Accepted Answer

The answer of 
  Creative Analysis, Inc. is currently...

Question 19

What is Stansﬁeld Corporation's addition to retained earnings with a 10% increase in sales? Assume the dividend payout ratio and proﬁt margin remain ﬁxed.

Accepted Answer

The answer of 
 What is Stansﬁeld Corporation's addition to...

Question 20

Assume costs, assets, and accounts payable all increase at the same rate as sales. Also assume 80% of net income is paid out in dividends. If sales grow at 25%, compute external ﬁnancing
Needed.

Accepted Answer

External financing needed = (Increase in assets - Increase in accounts payable) - (Increase in retained earnings)= (25% * Assets - 25% * Accounts payable) - (20% * Net income)= (25% * 100 - 25% * 20) - (20% * 80)= (25 - 5) - 16= $4

Quiz 4: Long-Term Financial Planning and Growth

Suppliers, Inc. has current sales of $2,400 and a proﬁt margin of 9%. The ﬁrm estimates that sales will decrease by 4% next year and that all costs will vary in direct relationship to sales. What is the Pro forma net income?

What is the addition to retained earnings if Stansﬁeld grows at the internal growth rate? (Assume the dividend payout ratio is ﬁxed.)

Calculate cash given the following information. Total current assets $57,000; supplies $4,000; average collection period 60.83 days; days' sales in inventory 97.33 days; sales 90,000; cost of Goods sold 75,000.

A ﬁrm currently has sales of $1.32 million and $964,500 in ﬁxed assets. Currently operations are at 84% of capacity. By how much can sales increase without requiring the ﬁrm to purchase any Additional ﬁxed assets?(Enter values in dollars)

Consultants, Inc. is currently operating at 95% of capacity. What is the required increase in ﬁxed assets if sales are projected to increase by 10%?

Assume Stansﬁeld Corporation is operating at full capacity. What will total assets be if sales increase by 10%? Assume costs, current liabilities, and current assets vary directly with sales and That the dividend payout ratio remains unchanged.

What is the pro forma retained earnings if Delalo, Inc. grows at a rate of 3.76% and both the proﬁt margin and the dividend payout ratio remain constant?

Assume costs, accounts payable, and current assets all increase at the same rate as sales. Also assume 80% of net income is paid out in dividends and that the ﬁrm is currently operating at 90% of Capacity. If sales grow at 25%, compute external ﬁnancing needed.

Given the following information: sales = $450, costs = $350, tax rate = 34%, retention ratio = 30%, production = 95% of capacity, sales increase = 10%. What is the expected addition to retained Earnings? (Assume costs change directly with sales.)

A Victoria ﬁrm currently has $1,800 in sales and is operating at 60 percent of the ﬁrm's capacity. What is the full capacity level of sales?

Assume Stansﬁeld Corporation is utilizing its ﬁxed assets at 90% capacity. Assume costs, current liabilities, and current assets vary directly with sales, and that the dividend payout ratio remains Unchanged. If sales increase by 20%, what will total ﬁxed assets be?

Kurt's Adventures is operating at full capacity with a sales level of $1,200 and ﬁxed assets of $900. What is the required addition to ﬁxed assets if sales are to increase by 20 percent?

What is Stansﬁeld Corporation's addition to retained earnings with a 10% increase in sales? Assume the dividend payout ratio and proﬁt margin remain ﬁxed.

Assume costs, assets, and accounts payable all increase at the same rate as sales. Also assume 80% of net income is paid out in dividends. If sales grow at 25%, compute external ﬁnancing Needed.