Question 1

Last year National Aeronautics had a FA/Sales ratio of 40%,comprised of $250 million of sales and $100 million of fixed assets.However,its fixed assets were used at only 75% of capacity.Now the company is developing its financial forecast for the coming year.As part of that process,the company wants to set its target Fixed Assets/Sales ratio at the level it would have had had it been operating at full capacity.What target FA/Sales ratio should the company set?

Accepted Answer

A)  28.5%
B)  30.0%
C)  31.5%
D)  33.1%
E)  34.7%F) C) and E)
G) B) and E)

Question 2

These are the simplified financial statements for Judd Enterprises.   Income statement  CurrentFrojected  Sales  na 1,000 Costs  na 700 Profit before tax  na 300 Taxes  na 90 Net income  na 210 Dividends  na 63 Balance sheets  Current  Projected  Current  Projected  Current assets 100115 Current liabilities 7081 Net fixed assets 9001,080 Long-term debt 400 Common stock 300 Retained earnings 230\begin{array}{l}\begin{array} { l c r } 	ext { Income statement } && 	ext { CurrentFrojected } \	ext { Sales } & 	ext { na } & 1,000 \	ext { Costs } & 	ext { na } & 700 \	ext { Profit before tax } & 	ext { na } & 300 \	ext { Taxes } & 	ext { na } & 90 \	ext { Net income } & 	ext { na } & 210 \	ext { Dividends } & 	ext { na } & 63\end{array}\\\begin{array} { l c r l c r } 	ext { Balance sheets } & 	ext { Current } & 	ext { Projected } & & 	ext { Current } 	ext { Projected } \	ext { Current assets } & 100 & 115 & 	ext { Current liabilities } & 70 & 81 \	ext { Net fixed assets } & 900 & 1,080 & 	ext { Long-term debt } & 400 \& & & 	ext { Common stock } & 300 \& & & 	ext { Retained earnings } & 230\end{array}\end{array} Income statement  Sales  Costs  Profit before tax  Taxes  Net income  Dividends ​ na  na  na  na  na  na ​ CurrentFrojected 1,0007003009021063​ Balance sheets  Current assets  Net fixed assets ​ Current 100900​ Projected 1151,080​ Current liabilities  Long-term debt  Common stock  Retained earnings ​ Current  Projected 70400300230​81​ 
-Refer to the Judd Enterprises financial statements.What is Judd's projected retained earnings under this plan?

Accepted Answer

A)  $339
B)  $377
C)  $396
D)  $415
E)  $440 F) A) and B)
G) A) and E)

Question 3

If a firm with a positive net worth is operating its fixed assets at full capacity,if its dividend payout ratio is 100%,and if it wants to hold all financial ratios constant,then for any positive growth rate in sales,it will require external financing.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is CORRECT?

Accepted Answer

A)  When fixed assets are added in large, discrete units as a company grows, the assumption of constant ratios is more appropriate than if assets are relatively small and can be added in small increments as sales grow.
B)  Firms whose fixed assets are "lumpy" frequently have excess capacity, and this should be accounted for in the financial forecasting process.
C)  For a firm that uses lumpy assets, it is impossible to have small increases in sales without expanding fixed assets.
D)  There are economies of scale in the use of many kinds of assets. When economies occur the ratios are likely to remain constant over time as the size of the firm increases. The Economic Ordering Quantity model for establishing inventory levels demonstrates this relationship.
E)  When we use the AFN equation, we assume that the ratios of assets and liabilities to sales (A0*/S0 and L0*/S0)  vary from year to year in a stable, predictable manner.F) A) and C)
G) None of the above

Question 5

Below are the simplified current and projected financial statements for Decker Enterprises. All of Decker's assets are operating assets. All of Decker's current liabilities are operating liabilities. 
-Based on the projections,Decker will have

Accepted Answer

A)  a financing surplus of $36
B)  a financing deficit of $36
C)  a financing surplus of $255
D)  a financing deficit of $255
E)  zero financing surplus or deficitF) C) and E)
G) A) and C)

Question 6

Below are the simplified current and projected financial statements for Decker Enterprises. All of Decker's assets are operating assets. All of Decker's current liabilities are operating liabilities. 
-If Decker had a financing deficit,it could remedy the situation by

Accepted Answer

A)  buying back common stock
B)  paying a special dividend
C)  paying down its long-term debt
D)  borrowing on its line of credit
E)  borrowing from retained earningsF) A) and B)
G) C) and D)

Exam 9: Corporate Valuation and Financial Planning

Correct Answer
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Below are the simplified current and projected financial statements for Decker Enterprises. All of Decker's assets are operating assets. All of Decker's current liabilities are operating liabilities. -Based on the projections,Decker will have

Correct Answer
verified

Correct Answer
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If a firm with a positive net worth is operating its fixed assets at full capacity,if its dividend payout ratio is 100%,and if it wants to hold all financial ratios constant,then for any positive growth rate in sales,it will require external financing.

Correct Answer
verified

Below are the simplified current and projected financial statements for Decker Enterprises. All of Decker's assets are operating assets. All of Decker's current liabilities are operating liabilities. -If Decker had a financing deficit,it could remedy the situation by

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
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Exam 9: Corporate Valuation and Financial Planning

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Below are the simplified current and projected financial statements for Decker Enterprises. All of Decker's assets are operating assets. All of Decker's current liabilities are operating liabilities. -Based on the projections,Decker will have

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a firm with a positive net worth is operating its fixed assets at full capacity,if its dividend payout ratio is 100%,and if it wants to hold all financial ratios constant,then for any positive growth rate in sales,it will require external financing.

Correct AnswerverifiedShow Answer

Below are the simplified current and projected financial statements for Decker Enterprises. All of Decker's assets are operating assets. All of Decker's current liabilities are operating liabilities. -If Decker had a financing deficit,it could remedy the situation by

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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