Monday 31 August 2015

Budject & Planning Multiple Choice Questions & Anwers

6. A firm’s sustainable rate of growth (g*) is determined by which of the following:
a. g* = ROE(1 - b).
b. g* = net income/common equity.
c. g* = sales/assets.
d. g* = common equity/assets.
Ans: a
7. The presence of excess capacity increases the need for discretionary financing for any level of sales increase.
A. True
B. False
Ans: b
8. If there exist economies of scale in inventory investment, the percent of sales method is likely to overstate additional asset needs for a given increase in sales.
a. True
b. False
Ans: a
9. At the sustainable rate of growth, the company does not need any additional assets to support the increased sales.
A. True
B. False
Ans: b
10. Which of the following work to automatically reduce the need for discretionary financing as sales increase?
a. Increases in spontaneous liabilities
b. Increases in retained earnings
c. Increases in fixed assets
d. Both a and b above
Ans: d

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