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Exam 19: Financial Planning and Managing Growth

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Question 31

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The financial planning model focuses on

A) the inventory accounting method decision and the accounts payables decision.
B) the current assets decision and the current liabilities decision.
C) the investment decision and the financing decision.
D) None of these

E) B) and C)
F) A) and D)

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Question 32

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Hilton Corp. has revenues of $1,214,800, costs of $816,355, and pays a tax rate of 32 percent. If the firm pays out 50 percent of its earnings as dividends every year, what is the amount of retained earnings?

A) $135,471.30
B) $270,942.60
C) $413,032.00
D) None of these

E) C) and D)
F) None of the above

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Question 33

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In the financing plan of a firm, management states that the firm will seek to raise funds externally even if sufficient internally generated funds are available to fund projects.

Tangent Inc. has revenues of $4,375,233, costs of $2,467,321, and pays a tax rate of 34 percent. If the firm pays out 60 percent of its earnings as dividends every year, what is the amount of retained earnings? (Round final answer to two decimal places.)

Sales are often correlated to the regional or national economy, so it is not necessary to incorporate economic forecasts into the model.

The sustainable growth rate is the rate of growth that a firm can sustain without selling additional debt.

Financial planning helps management to establish financial and operating goals for a firm and to communicate those goals throughout the firm.

Firms that achieve higher growth rates without seeking external financing

In cases where fixed assets are added as large discrete units, and much of a firm's capacity may not be utilized for some period of time. These types of assets are called lumpy assets.

Sterling Resorts Co. has total assets worth $13,442,975. It is expecting to grow its revenue at a rate of 25 percent next year. For next year, it expects a net income of $3,475,321 and will pay out 45 percent as dividends. What is the external financing needed by the firm to meet its growth expectations?

Projected or pro forma statements can be used to analyze the investment alternatives but not to estimate the amounts of external funding needed.

In the percent of sales model, all income statement and balance sheet accounts vary directly with sales.

Triumph Company has total assets worth $6,413,228. Next year it expects a net income of $3,145,778 and will pay out 70 percent as dividends. If the firm wants to limit its external financing to $1 million, what is the growth rate it can support? (Round your final answer to one decimal place.)

The outputs of the financial planning model are a series of pro forma financial statements and financial ratios based on these statements.

Which of the following statements is NOT true for a firm that operates below full capacity?

Which of the following issues is NOT addressed in a firm's financial plan?

Financial statements and sales forecasts are considered major inputs in developing financial planning models.

The sustainable growth rate is the rate of growth that a firm can sustain without selling additional equity while maintaining the same capital structure.

Which of the following is NOT true about the capital budgeting process?

Which of the following statements is NOT true?