1 . Please refer to Oscar’s financial statements above. What was Oscar’s increase in retained earnings during 2021?
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Multiple Choice
- $450
- A) $1,380
- $1,830
- $2,280
- None of the options are correct.
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2. Please refer to Oscar’s financial statements above. Sales are projected to increase by 3% next year. The profit margin and the dividend payout ratio are projected to remain constant. What is the projected addition to retained earnings for next year?
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Multiple Choice
- $1,309.19
- A) $1,421.40
- $1,884.90
- $2,667.78
- $3,001.40
- None of the options are correct.
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3. Please refer to Oscar’s financial statements above. All of Oscar’s costs and current asset accounts vary directly with sales. Sales are projected to increase by 10% next year. What is the pro forma accounts receivable balance for next year?
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Multiple Choice
- $949
- A) $1,034
- $1,113
- $1,730
- $2,670
- None of the options are correct.
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4. Please refer to Oscar’s financial statements above. Assume a constant profit margin and dividend payout ratio, and further assume all of Oscar’s assets and current liabilities vary directly with sales. Assume long-term debt and common stock remain unchanged. Sales are projected to increase by 10% next year. What is Oscar’s external financing need for next year?
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Multiple Choice
- − $410
- A) − $260
- $235
- $1,320
- $7,240
- None of the options are correct.
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5. Please refer to Oscar’s financial statements above. Assume a constant debt-equity ratio, net profit margin, and dividend payout ratio, and further assume all of Oscar’s expenses, assets, and current liabilities vary directly with sales. What is the pro forma net fixed asset value for next year if sales are projected to increase by 7.5%?
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Multiple Choice
- $10,857.50
- $10,931.38
- A) $11,663.75
- $15,587.50
- $18,987.50
- None of the options are correct.
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6. Please refer to the spreadsheet above. Selected assumptions are given for preparing pro forma financial statements for 2022. Which of the following formulas would correctly give the forecast for sales in cell C8?
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Multiple Choice
- = B8 * B2
- A) = B8 + B8 * B2
- = (1 + B8) * B2
- = (1 ÷ B2) * B8
- None of the options are correct.
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7. Please refer to the spreadsheet above. Selected assumptions are given for preparing pro forma financial statements for 2022. When the pro formas are completed, which of the following formulas would correctly give the forecast for cost of goods sold in cell C9?
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Multiple Choice
- = B9 * B3
- = B9 + B9 * B3
- = B8 * B3
- = B9 * B2
- A) None of the options are correct.
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8. Please refer to the spreadsheet above. Selected assumptions are given for preparing pro forma financial statements for 2022. Assume that no new equity will be issued and that no equity will be repurchased in 2022. When the pro formas are completed, which of the following formulas would correctly give the forecast for shareholders’ equity in cell G19?
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Multiple Choice
- = F19 * B2
- = F19 * (1 + B2)
- A) = F19 + (1 − B4) * C16
- = F19 + B4 * C16
- None of the options are correct.
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9. Please refer to the spreadsheet above. Selected assumptions are given for preparing pro forma financial statements for 2022. Assume that gross property plant and equipment (PP&E) will grow at the sales growth rate in 2022. When the pro formas are completed, which of the following formulas would correctly give the forecast for net PP&E in cell G12?
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Multiple Choice
- = F12 * B2
- = F12 * (1+B2)
- = F12 − B11
- = F12 − C11
- None of the options are correct.
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10. Which of the following statements is correct if a firm’s pro forma financial statements project net income of $12,000 and external financing required of $5,000?
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Multiple Choice
- Total assets cannot grow by more than $10,000.
- Dividends cannot exceed $10,000.
- Retained earnings cannot grow by more than $12,000.
- Long-term debt cannot grow by more than $5,000.
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11. The sustainable growth rate
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Multiple Choice
- is the highest growth rate attainable for a firm that pays no dividends.
- is the highest growth rate attainable for a firm without issuing new stock.
- can never be greater than the return on equity.
- can be increased by decreasing leverage.
- None of the options are correct.
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12. Enterex Corporation expects sales of $437,500 next year. Enterex’s profit margin is 4.8% and its dividend payout ratio is 40%. What is Enterex’s projected increase in retained earnings for next year?
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Multiple Choice
- $8,400
- A) $12,600
- $14,700
- $21,000
- $262,500
- None of the options are correct.
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13. Komatsu Corporation has a 4.5% profit margin and a 15% dividend payout ratio. Komatsu’s asset turnover ratio is 1.6 and its assets-to-equity ratio (using beginning-of-period equity) is 1.77. What is Komatsu’s sustainable rate of growth?
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Multiple Choice
- 1.9%
- 6.1%
- A) 10.8%
- 11.3%
- 12.7%
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14. A firm has a retention ratio of 40% and a sustainable growth rate of 6.2%. Its asset turnover ratio is 0.85, and its assets-to-equity ratio (using beginning-of-period equity) is 1.8. What is its profit margin?
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Multiple Choice
- 3.8%
- 5.7%
- 6.7%
- A) 10.1%
- 18.2%
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15. Westcomb, Incorporated had equity of $150,000 at the beginning of the year. At the end of the year, the company had total assets of $195,000. During the year, the company did not sell or repurchase any equity. Net income for the year was $72,000, and dividends were $44,640. What is Westcomb’s sustainable growth rate?
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Multiple Choice
- 15.3%
- 15.8%
- 17.8%
- 18.0%
- A) 18.2%
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16. In 2021, Santa Fe Corporation had profits of $500,000 on sales of $10,000,000. At the beginning of 2021 Santa Fe’s book equity was $2,500,000, and at the end of 2021 Santa Fe’s total assets were $5,000,000. What is Santa Fe’s sustainable rate of growth for 2021?
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Multiple Choice
- 5%
- 10%
- A) 20%
- 25%
- Insufficient information is given to determine the answer.
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17. Please refer to the selected financial information for Boss Stores above. What is the retention ratio for 2020?
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Multiple Choice
- 0.32
- 0.68
- 0.97
- 1.00
- None of the options are correct.
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18. Please refer to the selected financial information for Boss Stores above. What is the actual sales growth rate for 2020?
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Multiple Choice
- −17.6%
- −7.9%
- 8.5%
- A) 21.4%
- None of the options are correct.
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19. Please refer to the selected financial information for Boss Stores above. What is the sustainable growth rate for 2020?
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Multiple Choice
- −17.6%
- −7.9%
- A) 9.97%
- 10.27%
- 12.23%
- 21.40%
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20. Please refer to the selected financial information for Boss Stores above. What is the difference between Boss’s sustainable growth rate and its actual growth rate for 2021?
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Multiple Choice
- −11.40%
- −7.09%
- A) −3.04%
- 5.47%
- 13.98%
- 21.40%
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