If a firm chooses to maintain a fixed debt-equity ratio, it can raise the additional needed funds by:
A. issuing debt, in which case dividends become the balancing item.
B. issuing debt, in which case the amount of debt itself becomes the balancing item.
C. issuing stock, in which case dividends become the balancing item.
D. issuing stock, in which case no balancing item is needed.
78. Relative to its assets, a firm with a large volume of retained earnings and a high ROE:
A. will have a larger than average net income.
B. can generate a higher growth rate by raising more capital.
C. should increase its payout ratio.
D. can generate a higher growth rate without raising additional capital.
79. What new investment is required for a firm that projects 12% growth, has $400,000 in assets, and retained earnings of $40,000?
80. Which of the following is not typically included among the three major components of a financial planning model?
A. Inputs: current financial statements, forecasts of key variables
B. Planning model: equations specifying key relationships
C. Outputs: pro formas, financial ratios, sources and uses of cash
D. Intuitions: common sense, guesses
81. The implications of the forecasts from a financial plan are determined by the:
A. plan inputs.
B. balancing item.
C. planning model.
D. plowback ratio.
82. Alternative "what if?" scenarios can be easily accommodated in financial planning by use of:
A. sustainable growth models.
B. planning outputs.
C. spreadsheet programs.
D. bond covenants.
83. A major focus of financial planning is to:
A. minimize a firm's risk.
B. maximize a firm's risk.
C. analyze and select risks for the firm.
D. train the firm's management to operate without risk.
84. A major difference between financial planning and forecasting is that financial planning:
A. is forward-looking.
B. relies on the viewpoints of management.
C. determines the rate of profitability.
D. is equally concerned with less likely outcomes.
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