Question 1

Determine a firm's "return on assets" percentage based on the following information:sustainable growth rate = 20%; total assets $500,000; beginning of year common equity $200,000; and dividend payout percentage = 60%.
A)10.0%
B)12.5%
C)15.0%
D)17.5%
E)20.0%

Accepted Answer

The answer of Determine a firm's "return on assets" percentage...

Question 2

Determine a firm's "financial policy" multiplier based on the following information:sustainable growth rate = 20%; net profit margin = 10%; and asset turnover = 2 times.
A)1.00
B)1.25
C)1.50
D)1.75
E)2.00

Accepted Answer

The answer of Determine a firm's "financial policy" multiplier based...

Question 3

If beginning of period common equity is $200,000 and end of period common equity is $300,000,the sustainable growth rate is:
A)33%
B)40%
C)50%
D)67%
E)75%

Accepted Answer

The sustainable growth rate can be calculated as:
sustainable growth rate = ROE x (1 - dividend payout ratio)
where ROE is the return on equity and dividend payout ratio is the percentage of earnings that are paid out as dividends.
In this case, we are not given the ROE or the dividend payout ratio, so we cannot calculate the exact sustainable growth rate. However, we can determine the maximum sustainable growth rate by assuming a 100% retention ratio (i.e. all earnings are reinvested into the company). In this case, the sustainable growth rate would be:
sustainable growth rate = ROE
To determine the maximum ROE that would allow for a sustainable growth rate of 50%, we can solve the equation:
0.5 = ROE
ROE = 0.5 or 50%
Therefore, the best choice is C) 50%.

Question 4

Which one of the following would increase a firm's need for additional funds?
A)an increasing profit margin
B)a decreasing expected sales growth rate
C)an increase in accruals
D)an increasing dividend payout rate
E)a decrease in assets

Accepted Answer

Increasing dividend payout rate would increase the amount of cash that the firm needs to distribute to its shareholders, which would increase their need for additional funds.

Question 5

Your firm recorded sales for the most recent year of $10 million generated from an asset base of $7 million,producing a $500,000 net income.Sales are projected to grow at 20%,causing spontaneous liabilities to increase by $200,000.In the most recent year,$200,000 was paid out as dividends,and the current payout ratio will continue in the upcoming years.What is your firm's AFN?
A)$200,000
B)$600,000
C)$840,000
D)$960,000
E)$1,400,000

Accepted Answer

AFN = (Increase in assets - Increase in spontaneous liabilities - Increase in retained earnings)

Increase in assets = 20% of $7 million = $1.4 million
Increase in spontaneous liabilities = $200,000
Increase in retained earnings = 20% of $500,000 net income = $100,000
Dividends paid out = $200,000

Thus, AFN = ($1.4 million - $200,000 - $100,000) = $1.1 million. However, since the current payout ratio of $200,000 is expected to continue, we need to add that to the AFN calculation. Therefore, the AFN = $1.1 million + $200,000 = $1.3 million.

Since none of the answer choices match exactly, we need to choose the closest one, which is answer choice C ($840,000).

Question 6

Determine a venture's sustainable growth rate based on the following information:sales = $1,000,000; net income = $100,000; common equity at the beginning of the year = $500,000; and the retention rate = 50%.
A)10%
B)15%
C)20%
D)25%
E)30%

Accepted Answer

The answer of Determine a venture's sustainable growth rate based...

Question 7

Determine a venture's sustainable growth rate based on the following information:sales = $1,000,000; net income = $150,000; common equity at the end of last year = $520,000; and the dividend payout percentage = 20%.
A)10%
B)16%
C)20%
D)24%
E)30%

Accepted Answer

The answer of Determine a venture's sustainable growth rate based...

Question 8

A sales growth rate based on the retention of profits is referred to as the:
A)real sales growth rate
B)sustainable sales growth rate
C)spontaneous sales growth rate
D)nominal sales growth rate
E)weighted average sales growth rate

Accepted Answer

The sustainable sales growth rate is a rate at which a company can grow based on the retention of profits. It takes into account the company's ability to finance growth through reinvesting profits and is therefore a more realistic measure of a company's growth potential compared to nominal or spontaneous sales growth rates.

Question 9

If a venture has a return on assets (ROA)= 12%,an equity multiplier based on beginning equity = 3.0 times,and a sustainable growth rate of 18%,the retention rate would be:
A)10%
B)20%
C)30%
D)40%
E)50%

Accepted Answer

The answer of If a venture has a return on...

Question 10

If a venture has a return on assets (ROA)= 10%,an equity multiplier based on beginning equity = 4.0 times,and a dividend payout ratio of 60%,the sustainable growth rate would be:
A)10%
B)16%
C)20%
D)24%
E)40%

Accepted Answer

Sustainable growth rate (SGR) = ROA x Equity multiplier x (1 - dividend payout ratio)

= 0.1 x 4.0 x (1 - 0.6)

= 0.1 x 4.0 x 0.4

= 0.16 or 16%

Therefore, the best choice is (B) 16%, which is the sustainable growth rate for the venture.

Question 11

The financial funds still needed to finance asset growth after using spontaneously generated funds and any increase in retained earnings is called:
A)spontaneously generated funds
B)additional funds needed
C)addition in retained earnings
D)financial capital needed

Accepted Answer

The financial funds still needed to finance asset growth after using spontaneously generated funds (such as short-term loans, trade credit, and other liabilities) and any increase in retained earnings is called additional funds needed (AFN). This is the amount of external financing required to support the projected increase in assets. Therefore, option B is the correct answer. Options A, C, and D are incorrect as they do not accurately describe the concept of AFN.

Question 12

Use the following information to estimate a venture's sustainable growth rate: Net income = $200,000; Total assets = $1,000,000; equity multiple based on beginning common equity = 2.0 times; and Retention rate = 25%.
A)50%
B)25%
C)20%
D)10%
E)5%

Accepted Answer

The answer of Use the following information to estimate a...

Question 13

A firm has net income of $320,000 on sales of $3,200,000.Its assets total $2,000,000; the equity at the beginning of the year was $1,600,000 and dividends paid were $80,000.What is the sustainable growth rate?
A)5%
B)15%
C)6.25%
D)4.69%
E)none of the above

Accepted Answer

The answer of A firm has net income of $320,000...

Question 14

A venture's common equity account increased by $100,000 the past year and ended the year at $500,000.What was its sustainable sales growth rate?
A)5%
B)10%
C)15%
D)20%
E)25%

Accepted Answer

The answer of A venture's common equity account increased by...

Question 15

If a venture has a return on assets (ROA)= 10%,an equity multiplier based on beginning equity = 3.5 times,and a retention rate = 50%,the sustainable growth rate would be:
A)10%
B)17.5%
C)35%
D)40%
E)20.5%

Accepted Answer

Sustainable growth rate = (ROA x Equity multiplier x Retention rate)
Sustainable growth rate = (0.10 x 3.5 x 0.5)
Sustainable growth rate = 0.175 or 17.5%

Question 16

Which one of the following ratios is not part of the "standard" return on equity (ROE)model?
A)net profit margin
B)asset turnover
C)equity multiplier
D)retention rate

Accepted Answer

The standard ROE model includes the net profit margin, asset turnover, and equity multiplier ratios. The retention rate is a separate ratio that can be used to measure how much of a company's earnings are being reinvested back into the company rather than paid out as dividends to shareholders.

Question 17

A venture's common equity was $50,000 at the end of last year.If the venture's common equity at the end of this year was $60,000,what was its sustainable sales growth rate?
A)5%
B)10%
C)15%
D)20%
E)25%

Accepted Answer

To find the sustainable sales growth rate, we can use the equation:
Sustainable Sales Growth Rate = ((Ending Common Equity - Beginning Common Equity) / Beginning Common Equity) x 100
Plugging in the given values, we get:
Sustainable Sales Growth Rate = ((60000-50000)/50000) x 100 = 20%
Therefore, the answer is D, 20%.

Question 18

The financial funds needed to acquire assets necessary to support a firm's sales growth is called:
A)spontaneously generated funds
B)additional funds needed
C)addition in retained earnings
D)financial capital needed

Accepted Answer

The financial funds needed to acquire assets necessary to support a firm's sales growth is referred to as financial capital needed. Spontaneously generated funds refer to funds generated through operations without the need for external funds, additional funds needed refers to funds needed from external sources, and addition in retained earnings refers to the portion of net income retained by the company instead of being paid out as dividends.

Question 19

The increase in accounts payables and accruals that occur with a sales increase is called:
A)spontaneously generated funds
B)additional funds needed
C)addition in retained earnings
D)financial capital needed

Accepted Answer

Spontaneously generated funds refer to the increase in accounts payable and accruals that occur with a sales increase. This increase in funds is generated without the need for external financing or investment.

Question 20

Which of the following is a forecasting method used to project financial statements?
A)percent-of-sales method
B)percent-of-expenses method
C)GNP-ratio method
D)a and b
E)a,b,and c

Accepted Answer

The percent-of-sales method is commonly used to forecast financial statements by projecting future sales and estimating the expenses and other financial items based on the historical relationship between sales and expenses. The other two methods listed (percent-of-expenses method and GNP-ratio method) are not commonly used for financial statement forecasting.

Quiz 9: Projecting Financial Statements

Determine a firm's "return on assets" percentage based on the following information:sustainable growth rate = 20%; total assets $500,000; beginning of year common equity $200,000; and dividend payout percentage = 60%.

Determine a firm's "financial policy" multiplier based on the following information:sustainable growth rate = 20%; net profit margin = 10%; and asset turnover = 2 times.

If beginning of period common equity is $200,000 and end of period common equity is $300,000,the sustainable growth rate is:

Which one of the following would increase a firm's need for additional funds?

Determine a venture's sustainable growth rate based on the following information:sales = $1,000,000; net income = $100,000; common equity at the beginning of the year = $500,000; and the retention rate = 50%.

Determine a venture's sustainable growth rate based on the following information:sales = $1,000,000; net income = $150,000; common equity at the end of last year = $520,000; and the dividend payout percentage = 20%.

A sales growth rate based on the retention of profits is referred to as the:

If a venture has a return on assets (ROA) = 12%,an equity multiplier based on beginning equity = 3.0 times,and a sustainable growth rate of 18%,the retention rate would be:

If a venture has a return on assets (ROA) = 10%,an equity multiplier based on beginning equity = 4.0 times,and a dividend payout ratio of 60%,the sustainable growth rate would be:

The financial funds still needed to finance asset growth after using spontaneously generated funds and any increase in retained earnings is called:

Use the following information to estimate a venture's sustainable growth rate: Net income = $200,000; Total assets = $1,000,000; equity multiple based on beginning common equity = 2.0 times; and Retention rate = 25%.

A firm has net income of $320,000 on sales of $3,200,000.Its assets total $2,000,000; the equity at the beginning of the year was $1,600,000 and dividends paid were $80,000.What is the sustainable growth rate?

A venture's common equity account increased by $100,000 the past year and ended the year at $500,000.What was its sustainable sales growth rate?

If a venture has a return on assets (ROA) = 10%,an equity multiplier based on beginning equity = 3.5 times,and a retention rate = 50%,the sustainable growth rate would be:

Which one of the following ratios is not part of the "standard" return on equity (ROE) model?

A venture's common equity was $50,000 at the end of last year.If the venture's common equity at the end of this year was $60,000,what was its sustainable sales growth rate?

The financial funds needed to acquire assets necessary to support a firm's sales growth is called:

The increase in accounts payables and accruals that occur with a sales increase is called:

Which of the following is a forecasting method used to project financial statements?