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Fin 2
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Gravity
Terms in this set (29)
The portion of net income that a firm reinvests in itself is measured with the:
retention ratio.
The financial planning method that uses the projected sales level as the basis for determining changes in balance sheet and income statement account values is referred to as the ______ method.
percentage of sales
The sustainable growth rate of a firm is best described as the ______ growth rate achievable ______.
maximum; excluding any external equity financing, while maintaining a constant debt-equity ratio
Financial planning:
considers multiple options and scenarios.
When constructing a pro forma statement, net working capital generally:
varies proportionally with sales.
A firm is currently operating at full capacity. Net working capital, costs, and all assets vary directly with sales. The firm does not wish to obtain any additional equity financing. The dividend payout ratio is constant at 40 percent. If the firm has a positive external financing need, that need will be met by:
long-term debt.
Barker Fabricating is operating at 79 percent capacity and earning a substantial profit. An increase in sales is least likely to increase the firm's:
fixed assets
All else constant, a(n) ______ will increase the internal rate of growth.
decrease in total assets
Which one of the following has the least effect on a firm's sustainable rate of growth?
Quick ratio
The retention ratio can be computed as:
1 − (Cash dividends/Net income).
Hayley won a lottery and will receive $1,000 each year for the next 30 years. The current value of these winnings is called the:
present value.
The interest earned on both the initial principal and the interest reinvested from prior periods is called:
compound interest.
Cullen invested $5,000 five years ago and earns 6 percent annual interest. By leaving his interest earnings in her account, he increases the amount of interest he earns each year. His investment is best described as benefitting from:
compounding.
Madelyn is calculating the present value of a bonus she will receive next year. The process she is using is called:
discounting.
Nirav just opened a savings account paying 2 percent interest, compounded annually. After four years, the savings account will be worth $5,000. Assume there are no additional deposits or withdrawals. Given this information, Nirav:
could have deposited less money today and still had $5,000 in four years if the account paid a higher rate of interest. Correct has an account currently valued at $5,000.
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