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Which one of the following statements is correct concerning the capital intensity ratio?


A) The capital intensity ratio is the reciprocal of the total asset turnover ratio.
B) The capital intensity ratio provides the amount of sales generated for each $1 in total assets.
C) The higher the capital intensity ratio, the less emphasis the firm puts on capital.
D) The capital intensity ratio is used to compute the internal rate of growth.
E) The capital intensity ratio relates the amount of current assets to long-term assets.

F) All of the above
G) A) and B)

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Assume Marble is projecting a 20% increase in sales for the coming year, with current assets, all costs, and current liabilities proportional to sales. Long-term debt is not proportional to sales. If the firm's tax rate remains unchanged, the dividend payout is 40%, and Marble is operating at 70% of Capacity, what is the external financing needed (EFN) for 2015 ($ in millions) ? A) EFN is negative B) $21.94 C) $48.31 Assume Marble is projecting a 20% increase in sales for the coming year, with current assets, all costs, and current liabilities proportional to sales. Long-term debt is not proportional to sales. If the firm's tax rate remains unchanged, the dividend payout is 40%, and Marble is operating at 70% of Capacity, what is the external financing needed (EFN) for 2015 ($ in millions) ? A) EFN is negative B) $21.94 C) $48.31 Assume Marble is projecting a 20% increase in sales for the coming year, with current assets, all costs, and current liabilities proportional to sales. Long-term debt is not proportional to sales. If the firm's tax rate remains unchanged, the dividend payout is 40%, and Marble is operating at 70% of Capacity, what is the external financing needed (EFN) for 2015 ($ in millions) ?


A) EFN is negative
B) $21.94
C) $48.31

D) None of the above
E) All of the above

Correct Answer

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Assets, accounts payable and costs are proportional to sales. Debt and equity are not. Wintergreen, Inc. is producing at 82% of capacity. What is the capital intensity ratio at maximum Capacity? A) .53 B) .63 C) 1.22 D) 1.44 E) 1.59 Assets, accounts payable and costs are proportional to sales. Debt and equity are not. Wintergreen, Inc. is producing at 82% of capacity. What is the capital intensity ratio at maximum Capacity? A) .53 B) .63 C) 1.22 D) 1.44 E) 1.59 Assets, accounts payable and costs are proportional to sales. Debt and equity are not. Wintergreen, Inc. is producing at 82% of capacity. What is the capital intensity ratio at maximum Capacity?


A) .53
B) .63
C) 1.22
D) 1.44
E) 1.59

F) None of the above
G) B) and E)

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A Montreal firm currently has sales of $864,000, a 34% marginal tax rate, and a dividend payout ratio of 55%. Costs equal 85% of sales. What is the anticipated increase to retained earnings if sales Are expected to increase by 6%?


A) $38,492
B) $40,801
C) $47,044
D) $49,867
E) $90,668

F) A) and E)
G) B) and C)

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Pizza Piatta has net income of $680 and total equity of $4,000. The debt-equity ratio is 1.0 and the payout ratio is 40 percent. What is the internal growth rate?


A) 3.52%
B) 5.37%
C) 7.30%
D) 9.64%
E) 11.36%

F) A) and B)
G) B) and E)

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Calculate the external financing needed given the following information: current sales = $275,000; current sales capacity = 75%; current fixed assets = $40,000; projected future sales = $475,000.


A) $11,818
B) $51,818
C) $12,818
D) $52,818
E) $60,818

F) A) and C)
G) B) and E)

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Rondolo, Inc. does not want to incur any additional external financing. The dividend payout ratio is constant. What is their maximum rate of growth? A) 4.24% B) 4.43% C) 4.46% D) 4.53% E) 4.61 % Rondolo, Inc. does not want to incur any additional external financing. The dividend payout ratio is constant. What is their maximum rate of growth? A) 4.24% B) 4.43% C) 4.46% D) 4.53% E) 4.61 % Rondolo, Inc. does not want to incur any additional external financing. The dividend payout ratio is constant. What is their maximum rate of growth?


A) 4.24%
B) 4.43%
C) 4.46%
D) 4.53%
E) 4.61 %

F) A) and C)
G) A) and B)

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Consider a firm which forecasts that costs, assets, and current liabilities will all change proportionately with sales and the dividend payout ratio will remain fixed. How will the firm's ROE change as a result of a forecast 30% increase in sales? How will the individual components of ROE (the Du Pont identity) change? Why?

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The ROE and all of its compone...

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The retention ratio is equal to:


A) (net income - dividends paid) /sales.
B) The change in retained earnings/sales.
C) 1 - dividend payout ratio.
D) Net income × (1 + dividend payout ratio) .
E) 1 - plowback ratio.

F) A) and B)
G) C) and D)

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Assume Xylon, Inc. is currently operating at less than full capacity. Which of the following would be LEAST likely to vary directly with sales?


A) Notes payable.
B) Accounts receivable.
C) Accounts payable.
D) Inventory.
E) Cash.

F) D) and E)
G) A) and D)

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The sustainable growth rate of a firm is best described as the:


A) Minimum growth rate achievable if the firm does not pay out any cash dividends.
B) Minimum growth rate achievable if the firm maintains a constant equity multiplier.
C) Maximum growth rate achievable without external financing of any kind.
D) Maximum growth rate achievable without using any external equity financing, and while maintaining a constant debt-equity ratio.
E) Maximum growth rate achievable without any limits on the level of debt financing.

F) B) and E)
G) D) and E)

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Calculate retention ratio given the following information: net income = $90,000; cash dividends paid = $76,500.


A) 25%
B) 75%
C) 50%
D) 85%
E) 15%

F) All of the above
G) B) and C)

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A Toronto firm wants to maintain a growth rate of 8% without incurring any additional equity financing. The firm maintains a constant debt-equity ratio of .5, a total asset turnover ratio of .83, And a profit margin of 8 percent. What must the retention ratio be?


A) 71.8 %
B) 72.7 %
C) 74.4%
D) 75.1 %
E) 76.3%

F) B) and E)
G) A) and D)

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Calculate the sustainable growth rate given the following information: return on equity = 15%; retention ratio = 85%.


A) 13.61%
B) 14.61%
C) 15.61%
D) 16.61%
E) 17.61%

F) All of the above
G) None of the above

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When constructing a pro forma statement, net working capital generally varies:


A) Directly with sales.
B) With the level of capacity utilization.
C) Directly with the growth rate of fixed assets.
D) Based upon the financial leverage employed.
E) As necessary to get the balance sheet to balance.

F) C) and D)
G) B) and C)

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The retention ratio is equal to one plus the dividend payout ratio.

A) True
B) False

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Calculate payout ratio given the following information: cash dividends paid = $35,525; sales = $900,000; cost of goods sold = $625,000; selling and administrative expenses = $100,000; interest Expense = $30,000; tax rate= 30%.


A) 70%
B) 30%
C) 50%
D) 35%
E) 65%

F) B) and C)
G) A) and E)

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Master Wood Carvers, Inc. currently has $134,000 of sales and net income of $15,600. The firm is expecting sales growth of 6% next year. Costs are a constant percentage of sales. What is the Projected net income for next year?


A) $15,600
B) $16,536
C) $16,708
D) $18,860
E) $23,100

F) B) and C)
G) C) and D)

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Why is it important for managers to understand the importance of both the internal and the sustainable rates of growth?

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One reason that causes firms to go out of...

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Based on your financial plan, it is likely that your firm will be unable to sell all of the units of your product produced over the planning horizon. This suggests a need to make changes in:


A) Capital structure policy.
B) Dividend policy.
C) Net working capital decisions.
D) Capital budgeting decisions.
E) Wage policy decisions.

F) C) and E)
G) A) and C)

Correct Answer

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