Reference no: EM131427159

1. If the Hunter Corp. has an ROE of 13 and a payout ratio of 21 percent, what is its sustainable growth rate?(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

2. The most recent financial statements for Williamson, Inc., are shown here (assuming no income taxes):

Income Statement		Balance Sheet
Sales	7,200	Assets	24,500	Debt	10,000
Costs	5,270			Equity	14,500
Net income	1,930	Total	24,500	Total	24,500

Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year's sales are projected to be $8,136.

What is the external financing needed? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

3.The extended version of the percentage of sales method:
A. assumes that all net income will be retained by the firm and offset by a reduction in debt.
B. assumes that all net income will be paid out in dividends to stockholders.
C. requires that all financial statement accounts change at the same rate.
D.separates accounts that vary with sales from those that do not vary with sales.
E. is based on a capital intensity ratio of 1.0.

4. Financial planning, when properly executed:
A. reduces the necessity of daily management oversight of the business operations.
B. eliminates the need to plan more than one year in advance.
C. is based on the internal rate of growth.
D. ignores the normal restraints encountered by a firm.
E. ensures internal consistency among the firm's various goals.

5. The maximum rate at which a firm can grow while maintaining a constant debt-equity ratio is best defined by its:
A. rate of return on assets.
B. sustainable rate of growth.
C. rate of return on equity.
D. average historical rate of growth.
E. internal rate of growth.

6. The sustainable growth rate will be equivalent to the internal growth rate when, and only when,:
A. the plowback ratio is positive but less than 1.
B. the growth rate is positive.
C. a firm has no debt.
D. a firm has a debt-equity ratio equal to 1.
E. the retention ratio is equal to 1.

7. Which account is least apt to vary directly with sales?
A. accounts receivable
B. accounts payable
C. inventory
D. cost of goods sold
E. notes payable

8. In the financial planning model, the external financing needed (EFN) as shown on a pro forma balance sheet is equal to the changes in assets:
A. minus the change in retained earnings.
B.minus the changes in both liabilities and equity.
C. plus the changes in both liabilities and equity.
D. minus the changes in liabilities.
E. plus the changes in liabilities minus the changes in equity.

9. Marcie's Mercantile wants to maintain its current dividend policy, which is a payout ratio of 35 percent. The firm does not want to increase its equity financing but is willing to maintain its current debt-equity ratio. Given these requirements, the maximum rate at which Marcie's can grow is equal to:
A. 65 percent of the sustainable rate of growth.
B. the internal rate of growth.
C. the sustainable rate of growth.
D. 65 percent of the internal rate of growth.
E. 35 percent of the internal rate of growth.

10. One of the primary weaknesses of many financial planning models is that they:
A. ignore the goals and objectives of senior management.
B. ignore the size, risk, and timing of cash flows.
C. ignore cash payouts to stockholders.
D. are iterative in nature.
E. rely too much on financial relationships and too little on accounting relationships.

11. Projected future financial statements are called:
A. plug statements.
B. pro forma statements.
C. comparative statements.
D. reconciled statements.
E. aggregated statements.

12. The return on equity can be calculated as:
A. Profit margin × ROA.
B. ROA ×(Net income / Total assets).
C. Profit margin × ROA × Total asset turnover.
D. ROA × Debt-equity ratio.
E. ROA × Equity multiplier.

13. When credit is granted to another firm this gives rise to a(n):
A. accounts receivable and is called trade credit.
B. credit due and is called an installment note.
C. trade receivable and is called an installment note.
D. accounts receivable and is called a consumer credit.
E. trade receivable and is called a secured loan.

14. The most common means of financing a temporary cash deficit is a:
A. short-term secured bank loan.
B. long-term unsecured bank loan.
C. short-term issue of corporate bonds.
D. long-term secured bank loan.
E. short-term unsecured bank loan.

15. Given a fixed level of sales and a constant profit margin, an increase in the accounts payable period can result from:
A. a decrease in the operating cycle.
B. an increase in the cost of goods sold account value.
C. an increase in the ending accounts payable balance.
D. a decrease in the average accounts payable balance.
E. an increase in the cash cycle.

16. The minimum level of inventory that a firm wants to keep on hand at all times is referred to as:
A. safety stock.
B. the opportunity cost.
C. keiretsu.
D. the reorder point.
E. the base level.

17. The three components of credit policy are:
A. interest rate determination, repayment analysis and terms of sale.
B. collection policy, credit analysis, and interest rate determination.
C. collection policy, interest rate determination, and repayment analysis.
D. collection policy, credit analysis, and terms of the sale.
E. credit analysis, repayment analysis, and terms of the sale.

18. Selling goods and services on credit is:
A. an investment in a customer.
B. a decision independent of customers.
C. never necessary unless customers cannot pay for the goods.
D. permissible only if your bank lends the money.
E. never a wise decision.

19. The credit period begins on the:
A. shipping arrival date.
B. purchase order date.
C. order process date.
D. invoice date.
E. shipping date.

20.The operating cycle can be decreased by:
A. paying accounts payable faster.
B. discontinuing the discount given for early payment of an accounts receivable.
C. collecting accounts receivable faster.
D. decreasing the inventory turnover rate.
E. increasing the accounts payable turnover rate.

21. All of the following can provide credit information about a customer except:
A. the customer's current payment history with the seller.
B.credit reports.
C. the amount of goods the customer desires to purchase.
D.banks.
E. the customer's financial statements.

22. Since the credit decision usually includes riskier customers, the decision should adjust for this by:
A.discounting the cash inflows at a higher discount rate.
B.discounting the net cash flows at a lower discount rate.
C.increasing the variable cost per unit.
D.decreasing the variable cost per unit.
E.determining the probability that customers will not pay and reducing the expected cash flow.

23. On average, D & M sells its inventory in 37 days, collects on its receivables in 3.4 days, and takes 35 days to pay for its purchases. What is the length of the firm's operating cycle?
A. -1.4 days
B. 5.4 days
C. 40.4 days
D. 33.6 days
E. 41.6 days

24. A firm has an inventory turnover rate of 15.7, a receivables turnover rate of 20.2, and a payables turnover rate of 14.6. How long is the cash cycle?
rev: 05_12_2016_QC_CS-51572
A. 23.37 days
B. 16.32 days
C. 32.87 days
D. 13.08 days
E. 28.46 days

25. Brown's Market currently has an operating cycle of 76.8 days. It is planning some operational changes that are expected to decrease the accounts receivable period by 2.8 days and decrease the inventory period by 3.1 days. The accounts payable turnover rate is expected to increase from 9 to 11.5 times per year. If all of these changes are adopted, what will be the firm's new operating cycle?
A. 70.9 days
B.68.4 days
C.73.4 days
D. 63.3 days
E. 57.9 days

26. Jordan and Sons has an inventory period of 48.6 days, an accounts payable period of 36.2 days, and an accounts receivable period of 29.3 days. Management is considering offering a 5 percent discount if its credit customers pay for their purchases within 10 days. This discount is expected to reduce the receivables period by 17 days. If the discount is offered, the operating cycle will decrease from ___ days to ___ days.
A.54.2; 37.2
B. 77.9; 94.9
C. 28.3; 11.3
D. 28.3; 4