FIN 571 Week 3 Connect Problems - Assignment

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Title: FIN 571 Week 3 Connect Problems - Assignment

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FIN 571 Week 3 Connect Problems - Assignment

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1 If the Hunter Corp. has an ROE of 13 and a
payout ratio of 30 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.)
Sustainable growth rate ____
2 The most recent financial statements for
Williamson, Inc., are shown here (assuming no
income taxes)
Income Statement Balance Sheet
Sales 6,700 Assets 22,050 Debt 8,050
Costs 3,850 Equity 14,000
Net income 2,850 Total 22,050 Total 22,050
Assets and costs are proportional to sales. Debt
and equity are not. No dividends are paid. Next
years sales are projected to be 7,906.
What is the external financing needed? (Do not
round intermediate calculations and round your
answer to the nearest whole number, e.g., 32.)
External financing needed _____

3 Projected future ?nancial statements are
called
plug statements.
pro forma statements.
reconciled statements.
aggregated statements.
comparative statements.
4 One of the primary weaknesses of many ?nancial
planning models is that they
rely too much on ?nancial relationships and too
little on accounting relationships.
are iterative in nature.
ignore the goals and objectives of senior
management.
ignore cash payouts to stockholders.
ignore the size, risk, and timing of cash ?ows

5 The maximum rate at which a ?rm can grow while
maintaining a constant debt-equity ratio is best
de?ned by its
rate of return on assets.
internal rate of growth.
average historical rate of growth.
rate of return on equity.
sustainable rate of growth.
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571 Week 3 Connect Problems - Assignment
6 The external funds needed (EFN) equation
projects the addition to retained earnings as
PM ? Sales.
PM ? Sales (1 - d).
PM Projected sales (1 - d).
Projected sales (1 - d).
PM Projected sales.

7 Financial planning, when properly executed
ignores the normal restraints encountered by a
?rm.
is based on the internal rate of growth.
reduces the necessity of daily management
oversight of the business operations.
ensures internal consistency among the ?rm?s
various goals.
eliminates the need to plan more than one year in
advance.
8 The return on equity can be calculated as
ROA Equity multiplier.
Pro?t margin ROA.
Pro?t margin ROA Total asset turnover.
ROA (Net income / Total assets).
ROA Debt-equity ratio.

9 In the ?nancial planning model, the external
?nancing needed (EFN) as shown on a pro forma
balance sheet is equal to the changes in assets
plus the changes in liabilities minus the changes
in equity.
minus the changes in both liabilities and equity.
minus the changes in liabilities.
plus the changes in both liabilities and equity.
minus the change in retained earnings.
10 The extended version of the percentage of
sales method
assumes that all net income will be paid out in
dividends to stockholders.
assumes that all net income will be retained by
the ?rm and offset by a reduction in debt.
is based on a capital intensity ratio of 1.0.
requires that all ?nancial statement accounts
change at the same rate.
separates accounts that vary with sales from
those that do not vary with sales.
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11 The sustainable growth rate will be equivalent
to the internal growth rate when, and only when,
a ?rm has no debt.
the growth rate is positive.
the plowback ratio is positive but less than 1.
a ?rm has a debt-equity ratio equal to 1.
the retention ratio is equal to 1.
12 Which one of the following depicts a correct
relationship?
Dividend payout ratio 1 Retention ratio
Total asset turnover 1 Capital intensity
ratio
ROA ROE (1 Debt-equity ratio)
ROE 1 ROA
Equity multiplier 1 Debt-equity ratio

13 All of the following can provide credit
information about a customer except
the customers ?nancial statements.
credit reports.
the customers current payment history with the
seller.
the amount of goods the customer desires to
purchase.
banks.
14 The cash cycle is de?ned as the time between
the arrival of inventory and cash collected from
receivables.
selling a product and paying the supplier of that
product.
selling a product and collecting the accounts
receivable.
cash disbursements and cash collection for an
item.
the sale of inventory and cash collection.

15 The minimum level of inventory that a ?rm
wants to keep on hand at all times is referred
to as
the base level.
safety stock.
the opportunity cost.
the reorder point.
keiretsu.
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FIN 571 Week 3 Connect Problems
16 Given a ?xed level of sales and a constant
pro?t margin, an increase in the accounts payable
period can result from
an increase in the cost of goods sold account
value.
an increase in the ending accounts payable
balance.
an increase in the cash cycle.
a decrease in the operating cycle.
a decrease in the average accounts payable
balance.

17 Selling goods and services on credit is
an investment in a customer.
never necessary unless customers cannot pay for
the goods.
a decision independent of customers.
permissible only if your bank lends the money.
never a wise decision.
18 On September 1, a ?rm grants credit with
terms of 2/10 net 30. The creditor
must pay a penalty of 2/10 of one percent when
payment is made later than October 1.
must pay a penalty of 10 percent when payment is
made later than 2 days after October 1.
receives a discount of 2 percent when payment is
made at least 10 days prior to October 1.
receives a discount of 2 percent when payment is
made on September 1and pays a penalty of 10
percent if payment is made after October 1.
receives a discount of 2 percent when payment is
made within 10 days.

19 The three components of credit policy are
collection policy, credit analysis, and interest
rate determination.
collection policy, credit analysis, and terms of
the sale.
collection policy, interest rate determination,
and repayment analysis.
credit analysis, repayment analysis, and terms of
the sale.
interest rate determination, repayment analysis
and terms of sale.
20 The operating cycle can be decreased by
paying accounts payable faster.
discontinuing the discount given for early
payment of an accounts receivable.
decreasing the inventory turnover rate.
collecting accounts receivable faster.
increasing the accounts payable turnover rate.
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21 The credit period begins on the
shipping date.
purchase order date.
shipping arrival date.
order process date.
invoice date.
22 Since the credit decision usually includes
riskier customers, the decision should adjust for
this by
determining the probability that customers will
not pay and reducing the expected cash ?ow.
discounting the net cash ?ows at a lower discount
rate.
discounting the cash in?ows at a higher discount
rate.
increasing the variable cost per unit.
decreasing the variable cost per unit.

23 A ?rm 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
28.46 days
16.32 days
32.87 days
13.08 days
23.37 days
24 Browns 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 ?rm's
new operating cycle?
68.4 days
73.4 days
63.3 days
57.9 days
70.9 days

25 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.
28.3 11.3
77.9 60.9
28.3 45.3
77.9 94.9
54.2 37.2
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Connect Problems - Assignment

26 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 ?rms operating cycle?
1.4 days
5.4 days
33.6 days
40.4 days
41.6 days
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