A sales forecast that relies heavily on macroeconomic and industry forecasts is called a
d.none of the above
2.The short-term financing strategy where a company relies heavily on short term borrowing to finance a portion of their long term growth is called a(n)
3.The statement of the firm’s planned inflows and outflows of cash is called a(n)
d.none of the above
4.The growth rate at which a company can grow without issuing new shares of common stock while maintaining a constant total asset turnover and equity multiplier is called a(n)
a.internal growth rate
b.sustainable growth rate
c.optimal growth rate
d.maximal growth rate
5.The method in which pro forma statements are constructed by assuring that all items grow in proportion to sales is called the
a.percentage of sales method
b.common size method
c.sales dilution method
d.sales receipt method
Current Assets$400Accounts Payable$145
Fixed Assets500Long-term Debt455
Income Statement for End of Year
Tax (at 34%)92
6.Using the percentage of sales method what will be Smith’s net income if sales are expected to increase by 25%?
7.If Smith pays out 25% of their projected net income as dividends, what will be the company’s addition to retained earnings, if sales grow by 25% and all items on the income statement grow proportionally with sales?
8.What is Smith’s sustainable growth rate if the company has a dividend payout ratio of 75%?
9.If Smith pays out 75% of net income as dividends and sales are expected to grow by 25%, what are the external funds required?
10.If sales are expected to grow at 15% what are Smith’s retained earnings next year? Assume a constant profit margin and a dividend payout ratio of 50%.
Bavarian Brew’s schedule of projected cash disbursement
All of Bavarian Brew’s sales are credit sales. The company collects 60% of its sales in the next month and the remainder in the month after that.
11.What are Bavarian Brew’s cash collections in March?
12.What is the value of Bavarian Brew's receivables account at the end of February?
13.What are the Bavarian Brew’s cash collections in April?
14.What is the value of Bavarian Brew's receivables at the end of April?
15.Due to a change in economic conditions Bavarian Brew will only be able to collect 40% of its March sales in April. What is the effect on the company’s cash receipts in April as a result of this change?
a.cash receipts decline by $180
b.cash receipts decline by $90
c.cash receipts increase by $270
d.cash receipts increase by $90
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