Part 5

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User
Brooke B Hewitt
Course
BA 520: Financial Strat/Tech(68796-W15)
Test
Part 5 Quiz
Started
1/13/15 2:46 PM
Submitted
1/14/15 2:48 PM
Status
Completed
Attempt Score
75 out of 75 points  
Time Elapsed
24 hours, 1 minute.
Instructions

Question 1
3 out of 3 points

A rapid build-up of inventories normally requires additional financing, unless the increase is matched by an equally large decrease in some other asset.

Correct Answer:
 True

Question 2
3 out of 3 points

As a firm's sales grow, its current assets also tend to increase. For instance, as sales increase, the firm's inventories generally increase, and purchases of inventories result in more accounts payable. Thus, spontaneous liabilities that reduce AFN arise from transactions brought on by sales increases.

Correct Answer:
 True

Question 3
3 out of 3 points

If a firm wants to maintain its ratios at their existing levels, then if it has a positive sales growth rate of any amount, it will require some amount of external funding.

Correct Answer:
 False

Question 4
3 out of 3 points

One of the first steps in arriving at a firm's forecasted financial statements is a review of industry-average operating ratios relative to these same ratios for the firm to determine whether changes to the ratios need to be made.

Correct Answer:
 True

Question 5
3 out of 3 points

One of the necessary steps in the financial planning process is a forecast of financial statements under each alternative version of the operating plan in order to analyze the effects of different operating procedures on projected profits and financial ratios.

Correct Answer:
 True

Question 6
3 out of 3 points

Firms with high capital intensity ratios have found ways to lower this ratio permitting them to achieve a given level of growth with fewer assets and consequently less external capital. For example, just-in-time inventory systems, multiple shifts for labor, and outsourcing production are all feasible ways for firms to reduce their capital intensity ratios.

Correct Answer:
 True

Question 7
3 out of 3 points

Which of the following assumptions is embodied in the AFN equation?

Correct Answer:
 
Accounts payable and accruals are tied directly to sales.

Question 8
3 out of 3 points

The capital intensity ratio is generally defined as follows:

Correct Answer:
 
The amount of assets required per dollar of sales, or A0*/S0.

Question 9
3 out of 3 points

The term "additional funds needed (AFN)" is generally defined as follows:

Correct Answer:
 
Funds that a firm must raise externally from non-spontaneous sources, i.e., by borrowing or by selling new stock to support operations.

Question 10
3 out of 3 points

Last year Baron Enterprises had $350 million of sales, and it had $270 million of fixed assets that were used at 65% of capacity last year. In millions, by how much could Baron's sales increase before it is required to increase its fixed assets?

Correct Answer:
 
$188.46

Response Feedback:
Sales
$350
Fixed assets (not used in calculations)
$270
% of capacity utilized
65%
Sales at full capacity = Actual sales/% of capacity used =
$538.46

Additional sales without adding FA = Full capacity sales  Actual sales = $188.46

Question 11
3 out of 3 points

Spontaneous funds are generally defined as follows:

Correct Answer:

Funds that arise out of normal business operations from its suppliers, employees, and the government, and they include immediate increases in accounts payable, accrued wages, and accrued taxes.

Question 12
3 out of 3 points

Which of the following is NOT one of the steps taken in the financial planning process?

Correct Answer:
 
Consult with key competitors...
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