Question 1

Two firms with identical capital intensity ratios are generating the same amount of sales.However, Firm A is operating at full capacity, while Firm B is operating below capacity.If the two firms expect the same growth in sales during the next period, then Firm A is likely to need more additional funds than Firm B, other things held constant.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements is CORRECT?

Accepted Answer

A)   The first, and perhaps the most critical, step in forecasting financial requirements is to forecast future sales.
B)   Forecasted financial statements, as discussed in the text, are used primarily as a part of the managerial compensation program, where management's historical performance is evaluated.
C)   The capital intensity ratio gives us an idea of the physical condition of the firm's fixed assets.
D)   The AFN equation produces more accurate forecasts than the forecasted financial statement method, especially if fixed assets are lumpy, economies of scale exist, or if excess capacity exists.
E)   Perhaps the most important step when developing forecasted financial statements is to determine the breakdown of common equity between common stock and retained earnings.F) B) and E)
G) B) and D)

Question 3

The Besnier Company had $250 million of sales last year, and it had $75 million of fixed assets that were being operated at 80% of capacity.In millions, how large could sales have been if the company had operated at full capacity?

Accepted Answer

A)   $312.5
B)   $328.1
C)   $344.5
D)   $361.8
E)   $379.8F) A) and B)
G) C) and D)

Question 4

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

Accepted Answer

A)   Accounts payable and accruals are tied directly to sales.
B)   Common stock and long-term debt are tied directly to sales.
C)   Fixed assets, but not current assets, are tied directly to sales.
D)   Last year's total assets were not optimal for last year's sales.
E)   None of the firm's ratios will change.F) B) and D)
G) All of the above

Question 5

Weber Interstate Paving Co.had $450 million of sales and $225 million of fixed assets last year, so its FA/Sales ratio was 50%.However, its fixed assets were used at only 65% of capacity.If the company had been able to sell off enough of its fixed assets at book value so that it was operating at full capacity, with sales held constant at $450 million, how much cash (in millions)  would it have generated?

Accepted Answer

A)   $74.81
B)   $78.75
C)   $82.69
D)   $86.82
E)   $91.16F) B) and C)
G) C) and D)

Exam 12: Corporate Valuation and Financial Planning

The Besnier Company had $250 million of sales last year, and it had $75 million of fixed assets that were being operated at 80% of capacity.In millions, how large could sales have been if the company had operated at full capacity?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
verified

Exam 12: Corporate Valuation and Financial Planning

The Besnier Company had $250 million of sales last year, and it had $75 million of fixed assets that were being operated at 80% of capacity.In millions, how large could sales have been if the company had operated at full capacity?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified