Financial Management II Review

You are developing a financial plan for a corporation.

Which of the following questions will be considered as you develop this plan?

Select all that apply!

• How much net working capital will be needed?

• Will additional fixed assets be required?

• Will dividends be paid to shareholders?

• How much new debt must be obtained? 

• How much is the retention ratio?

You are getting ready to prepare pro forma statements for your business.

Which one of the following are you most apt to estimate first as you begin this process?

• Fixed assets

• Current expenses

• Sales forecast

• Projected net income

• External financing need

Which one of the following will cause the sustainable growth rate to equal to internal growth rate?

• dividend payout ratio greater than 1.0

• debt-equity ratio of 1.0

• retention ratio between 0.0 and 1.0

• equity multiplier of 1.0

• zero dividend payments

The Cookie Shoppe expects sales of $437,500 next year.

The profit margin is 4.8% and the firm has a 30% dividend payout ratio.

What is the projected increase in retained earnings?

• $14,700

• $17,500

• $18,300

• $20,600

• $21,000

Monika's Dinor is operating at 94 percent of its fixed asset capacity and has current sales of $611,000.

How much can the firm grow before any new fixed assets are needed?

• 4.99%

• 5.78%

• 6.02%

• 6.38%

• 6.79%

The process of determining the present value of future cash flows in order to know their worth today is called which one of the following?

• compound interest valuation

• interest on interest computation

• discounted cash flow valuation

• present value interest factoring

• complex factoring

Samantha opened a savings account this morning. Her money will earn 5 percent interest, compounded annually. After five years, her savings account will be worth $5,600. Assume she will not make any withdrawals.

Given this, which one of the following statements is true? Select all that apply!

• Samantha deposited more than $5,600 this morning

• The present value of Samantha's account is $5,600

• Samantha could have deposited less money and still had $5,600 in five years if she could have earned 5.5% interest

• Samantha would have had to deposit more money to have $5,600 in three years if she earns 5% interest

• Samantha will earn an equal amount of interest every year for the next five years

This morning, TL Trucking invested $80,000 to help fund a company expansion project planned for 4 years from now. How much additional money will the firm have 4 years from now if it can earn 5 percent rather than 4 percent on its savings?

• $2,940.09

• $3,651.82

• $4,008.17

• $4,219.68

• $4,711.08

You are comparing two annuities which offer quarterly payments of $2,500 for five years and pay 0.75 percent interest per month. Annuity A will pay you on the first of each month while annuity B will pay you on the last day of each month.

Which one of the following statements is correct concerning these two annuities?

• These two annuities have equal present values but unequal futures values at the end of year five

• These two annuities have equal present values as of today and equal future values at the end of year five

• Annuity B is an annuity due

• Annuity A has a smaller future value than annuity B

• Annuity B has a smaller present value than annuity A

Which one of the following statements concerning interest rates is correct?

• Savers would prefer annual compounding over monthly compounding

• The effective annual rate decreases as the number of compounding periods per year increases

• The effective annual rate equals the annual percentage rate when interest is compounded annually

• Borrowers would prefer monthly compounding over annual compounding

• For any positive rate of interest, the effective annual rate will always exceed the annual percentage rate