Question : Bavarian Brew’s schedule of projected cash disbursement JanFebMarApr Sales$510$870$450$600 All of Bavarian Brew’s : 1325758

 

 

Bavarian Brew’s schedule of projected cash disbursement

JanFebMarApr

Sales$510$870$450$600

 

All of Bavarian Brew’s sales are credit sales. The company collects 60% of its sales in the next month and the remainder in the month after that.

 

The company’s purchases are 75% of its sales. Of those purchases 15% are paid in cash, 50% are paid in the following month and the remainder in the month after that. The company’s wages and salaries equal 15% of sales each month plus $50. Taxes of $125 are due in April. The company is going to purchase new machinery worth $1000 in March and pay 50% right away and the rest in April. In addition, the company will pay a $175 dividend in February.

 

22.If Bavarian Brew starts the year with a cash balance of $500, what is the cash balance at the end of January? Assume that December sales were $450 and November sales were $550.

a.$483

b.$493

c.$497

d.$500

 

 

 

 

23.What is Bavarian Brew’s expected net cash flow in March?

a.-$402.25

b.$402.25

c.$726

d.-$1,128.25

 

 

 

24.If the cash balance at the beginning of March is $250, what is Bavarian Brew’s cash balance at the end of the month?

a.$250

b.-$152.25

c.$652.25

d.-$652.25

 

 

 

 

25.Due to a change in economic conditions Bavarian Brew will only be able to collect 40% of its March sales in April. What is company’s cash net cash flow in April as a result of this change?

a.$528

b.$1229.63

c.-$701.63

d.$701.63

 

 

 

26.Which of the following most likely is not a question asked in long-term financial planning?

a.What threats to our current business exist?

b.What is (are) our core competency(ies)?

c.Can we do better by leaving markets (selling assets) and investing elsewhere?

d.Should we acquire new vending machines for the employees’ breakrooms?

 

 

 

27.A firm can grow more rapidly if (consider each in isolation):

a.it pays larger dividends.

b.it uses less debt.

c.its asset to sales ratio is larger.

d.its profit margin is larger.

 

 

 

28.The rate at which a firm can grow without issuing any new shares of stock while keeping its dividend policy, financial policy, and profitability constant is the

a.optimal growth rate

b.marginal growth rate

c.sustainable growth rate

d.theoretical growth rate

 

 

 

29.Suppose a firm forecasts sales growth larger than its sustainable growth rate, but plans to add fewer assets than the current asset to sales ratio implies. If other aspects of the firm’s performance remain constant, the pro forma external funds required (EFR)

a.will likely be larger than the sustainable growth rate implies.

b.will likely be smaller than the sustainable growth rate implies.

c.will likely be the same as the sustainable growth rate implies.

d.cannot be determined from this information.

 

 

 

30.Suppose a firm experiences a seasonal pattern in its sales, in addition to a long-term upward trend. Which of the following financing plans has the potential to be less costly to the firm?

a.a conservative strategy

b.an aggressive strategy

c.a matching strategy

d.they are equally likely to be low-cost

 

 

 

31.Suppose a firm experiences a seasonal pattern in its sales, in addition to a long-term upward trend. Which of the following financing plans has the potential to be less risky to the firm?

a.a conservative strategy

b.an aggressive strategy

c.a matching strategy

d.They are equally likely to be low-risk.

 

 

 

32.DigIt! Corporation has the following financial information: its profit margin is 10%, its total asset turnover is 1.75, its assets to equity ratio is 1.5, and it pays out 35% of its earnings in dividends. What is its sustainable growth rate?

a.22.10%

b.20.57%

c.9.75%

d.47.39%

 

 

 

33.DigIt! Corporation has the following financial characteristics: its profit margin is 10%, its total asset turnover is 1.75, its asset to equity ratio is 1.5 and its sustainable growth rate is 20.6%. What dividend payout ratio is consistent with these values?

a.45%

b.55%

c.65%

d.35%

 

 

 

34.Big Deal, Inc. wants to grow 30% next year. If it maintains its 40% dividend payout ratio, liabilities to equity ratio of 1, and total asset turnover of 2, what must its profit margin be to achieve this growth?

a.9.6%

b.25.8%

c.38.5%

d.51.2%

 

 

 

35.If a company has a liabilities to equity ratio of 0.5, then its assets to equity ratio is

a.0.5

b.1.0

c.1.5

d.2.0

 

 

 

36.MoMoney Co. wants to increase its sustainable growth rate to 10%. If it maintains its 15% profit margin, 25% retention ratio, and 0.25 liabilities to equity ratio, what must its total asset turnover value be?

a.0.42

b.0.65

c.1.94

d.2.37