Exam Questions Financial Planning and Forecasting Ch.15

Finance, 5e (Cornett)

Chapter 15 Financial Planning and Forecasting

1) Which of the following is a set of financial statements depicting an operating division of a firm's expected financial situation in the foreseeable future under the most reasonable set of assumptions concerning relevant factors?

A) Base case projections

B) Deseasonalized financial statements

C) Naïve financial statements

D) Pro forma financial statements

2) The set of assumptions underlying the firm's financial plan and the resulting projected financial statements are accordingly often referred to as which of the following?

A) Base case projections

B) Deseasonalized financial statements

C) Naïve financial statements

D) Pro forma financial statements

3) Financial planning involves estimating projected cash flows, which is useful for all of the following EXCEPT

A) setting internal goals.

B) providing information to shareholders and other external stakeholders concerning the firm's future expectations.

C) estimating the firm's future needs for internal and external financing.

D) auditors to determine if the company's annual report is true and correct.

4) The simplest approach to estimating a future period's sales is to assume that they will be equal to those of the latest observed period. In statistics, this is often simply referred to as which of the following?

A) Base case approach

B) Deseasonalized approach

C) Naïve approach

D) Pro forma approach

5) Forecasted sales drive all of the following EXCEPT

A) the amount of assets needed.

B) the liabilities needed.

C) the external funds needed.

D) earnings per share on the annual report.

6) Which of the following is defined as assuming that future sales will be equal to the average historical value across some relevant period?

A) Average approach

B) Base case approach

C) Naïve approach

D) Pro forma approach

7) Which of the following is used to remove the effects of seasonality from historic data?

A) Average approach

B) Base case approach

C) Deseasonalized approach

D) Pro forma approach

8) Which of the following is the practice of one firm selling to another on credit terms?

A) Accounts payable

B) Accounts receivable

C) Barter transactions

D) Trade credit

9) What is computed by dividing the amount of assets tied directly to sales (A*) by the amount of current sales (S0)?

A) Capital intensity ratio

B) Current ratio

C) Quick ratio

D) Spontaneous assets

10) Which of the following is the amount of external financing a firm must seek in order to change the asset base as necessary to support a different level of sales?

A) Additional funds needed

B) Capital intensity ratio

C) Current ratio

D) Spontaneous assets

11) Which of the following can be computed as: necessary increase in assets minus spontaneous increase in liabilities minus projected increase in retained earnings?

A) Additional funds needed

B) Capital intensity ratio

C) Current ratio

D) Spontaneous assets

12) If a firm has excess capacity when calculating AFN (Additional Funds Needed), A* will most likely equal which of the following?

A) Total assets

B) Current assets

C) Fixed assets

D) Lumpy assets

13) Which of the following are considered "chunky" or "lumpy" assets?

A) Total assets

B) Current assets

C) Fixed assets

D) Additional funds needed (AFN)

14) The additional funds needed by the firm can be calculated by assuming which of the following?

A) The firm's additional sales will grow proportionately as assets are purchased.

B) The firm's additional capital needed will grow proportionately with projected changes in sales.

C) The firm's balance sheet will grow proportionately with projected changes in sales.

D) The firm's additional sales will grow proportionately as capital is brought on to the balance sheet.

15) Which statement is most correct regarding how pro forma financial statements can be used to estimate additional funds needed?

A) Pro forma statements can be used to iteratively refine the amount of additional funds needed.

B) Pro forma statements are less precise than other methods for determining additional funds needed.

C) Pro forma statements take into account changes in cost of goods sold that other methods of determining additional funds needed ignore.

D) Pro forma statements take into account dividend payments that other methods of determining additional funds needed ignore.

16) Which of the following defines the term deseasonalize?

A) To use pro forma statements to determine future years' forecasts

B) To remove the effects of seasonality from historic data

C) To remove fixed asset growth that does not tie into sales growth

D) To fix asset growth to smooth out the seasonality of sales growth

17) Which of the following defines MAPE?

A) Median absolute percentage error, a measure of a financial statement's accuracy

B) Median absolute percentage error, a measure of a forecast's accuracy

C) Mean absolute percentage error, a measurement of a forecast's accuracy

D) Mean absolute percentage error, a measure of a financial statement's accuracy

18) First order effects are defined as which of the following?

A) The subsequent, less observable effects of the change

B) The subsequent, more observable effects of the change

C) Higher order effects of the change

D) The immediately observable effects of changing one item on another

19) Which of the following defines iterative calculation?

A) The practice of overriding a spreadsheet program or calculator in order to be able to compute an answer so as to take into account circular dependency in a system of equations

B) The practice of ensuring there are no circular dependencies in a system of equations

C) The practice of letting a spreadsheet program or calculator repeatedly compute an answer so as to take into account circular dependency in a system of equations

D) The practice of using the AFN formula to calculate an answer in order to avoid circular dependencies in a system of equations

20) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the naïve approach?

A) $1,000,000

B) $1,740,000

C) $1,925,000

D) $2,200,000

21) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the naïve approach?

A) $10,000,000

B) $10,550,000

C) $10,840,000

D) $12,000,000

22) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach?

A) $1,000,000

B) $1,740,000

C) $1,925,000

D) $2,200,000

23) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach?

A) $500,000

B) $580,000

C) $625,000

D) $700,000

24) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach?

A) $10,000,000

B) $10,550,000

C) $10,840,000

D) $12,000,000

25) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach if it was determined that 2013 is a "stale" year?

A) $1,000,000

B) $1,740,000

C) $1,925,000

D) $2,200,000

26) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach if it was determined that years 2013 and 2014 were "stale"?

A) $1,900,000

B) $2,500,000

C) $2,833,333

D) $3,000,000

27) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach if it is determined that 2016 is a "stale" year?

A) $400,000

B) $580,000

C) $625,000

D) $700,000

28) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach if it is determined that none of the years are "stale"?

A) $1,600,000

B) $1,660,000

C) $1,700,000

D) $1,800,000

29) Suppose that PBJ Industries, Inc. currently has the balance sheet shown as follows, and that sales for the year just ended were $10 million. The firm also has a profit margin of 10 percent, a retention ratio of 25 percent, and expects sales of $12 million next year. If all assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth?

A) $0

B) $6,250

C) $30,000

D) $100,000

30) Suppose that BBM Industries, Inc. currently has the balance sheet shown as follows, and that sales for the year just ended were $2 million. The firm also has a profit margin of 5 percent, a retention ratio of 50 percent, and expects sales of $2.5 million next year. If all assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth?

A) $0

B) $62,500

C) $437,500

D) $500,000

31) Suppose that TV Industries, Inc. currently has the balance sheet shown as follows, and that sales for the year just ended were $5 million. The firm also has a profit margin of 15 percent, a retention ratio of 25 percent, and expects sales of $5.5 million next year. If all assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth?

A) $0

B) $6,250

C) $206,250

D) $12,500

32) Suppose that Team Industries, Inc. currently has the balance sheet shown as follows, and that sales for the year just ended were $3 million. The firm also has a profit margin of 20 percent, a retention ratio of 30 percent, and expects sales of $6 million next year. If all assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources?

A) $2,140,000

B) $2,320,000

C) $2,500,000

D) $4,500,000

33) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using regression to estimate a trend?

A) $2,140,000

B) $2,225,000

C) $2,300,000

D) $2,500,000

34) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using regression to estimate a trend?

A) $2,340,000

B) $2,500,000

C) $2,575,000

D) $2,600,000

35) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using regression to estimate a trend?

A) $12,000,000

B) $12,140,000

C) $12,300,000

D) $13,100,000

36) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using regression to estimate a trend?

A) $850,000

B) $860,000

C) $924,000

D) $874,000

37) Suppose that Runner Industries currently has the balance sheet shown as follows, and that sales for the year just ended were $5 million. The firm also has a profit margin of 10 percent, a retention ratio of 20 percent, and expects sales of $7 million next year. If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth?

A) $0

B) $140,000

C) $220,000

D) $180,000

38) Suppose that Wave Industries currently has the balance sheet shown as follows, and that sales for the year just ended were $25 million. The firm also has a profit margin of 10 percent, a retention ratio of 20 percent, and expects sales of $27 million next year. If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth?

A) $0

B) $300,000

C) $340,000

D) $20,000

39) Suppose that Road Industries currently has the balance sheet shown as follows, and that sales for the year just ended were $80 million. The firm also has a profit margin of 5 percent, a retention ratio of 10 percent, and expects sales of $82 million next year. If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth?

A) $0

B) $122,500

C) $112,500

D) $287,500

40) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the naïve approach?

A) $1,780,000

B) $1,650,000

C) $2,100,000

D) $1,686,000

41) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the naïve approach?

A) $2,100,000

B) $2,200,000

C) $1,780,000

D) $1,730,000

42) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the naïve approach?

A) $2,450,000

B) $2,900,000

C) $2,350,000

D) $2,585,000

43) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach?

A) $1,370,000

B) $1,430,000

C) $1,510,000

D) $1,625,000

44) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach?

A) $1,990,000

B) $1,830,000

C) $2,160,000

D) $2,080,000

45) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach?

A) $2,730,000

B) $2,810,000

C) $2,910,000

D) $2,990,000

46) Suppose that Gyp Sum Industries currently has the balance sheet shown as follows, and that sales for the year just ended were $20 million. The firm also has a profit margin of 22 percent, a retention ratio of 42 percent, and expects sales of $30 million next year. If all assets and current liabilities are expected to grow with sales, how much additional funds will Gyp Sum need from external sources to fund the expected growth?

A) $3,925,000

B) $3,695,000

C) $4,124,000

D) $4,478,000

47) Suppose that Psy Ops Industries currently has the balance sheet shown as follows, and that sales for the year just ended were $6 million. The firm also has a profit margin of 9 percent, a retention ratio of 5 percent, and expects sales of $8.5 million next year. If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, how much additional funds will Psy Ops need from external sources to fund the expected growth?

A) $795,100

B) $141,300

C) $783,600

D) $214,900

48) Goldilochs Inc. reported sales of $5 million and net income of $1 million. The firm has $10.5 million in total assets. The firm's chief financial officer is projecting a 20 percent increase in sales. If the firm's sales do increase by 20 percent, it is expected that spontaneous liabilities will increase by $1 million. The firm currently pays out 30 percent of its net income to shareholders. Assuming that all assets are expected to grow with sales, how much in additional funds will Goldilochs need from external sources to fund the expected growth?

A) $245,000

B) $197,000

C) $221,000

D) $260,000

49) Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has $10.5 million in total assets. The firm's chief financial officer is projecting a 20 percent increase in sales. If the firm's sales do increase by 20 percent, it is expected that spontaneous liabilities will increase by $500,000. The firm currently pays out 30 percent of its net income to shareholders. Assuming that all assets are expected to grow with sales, how much in additional funds will Goldilochs need from external sources to fund the expected growth?

A) $340,000

B) $299,000

C) $321,000

D) $360,000

50) Suppose that Wind Em Corp. currently has the balance sheet shown as follows, and that sales for the year just ended were $15 million. The firm also has a profit margin of 23 percent, a retention ratio of 40 percent, and expects sales of $20 million next year. If all assets and current liabilities are expected to grow with sales, what is the projected increase in retained earnings?

A) $1,050,000

B) $1,240,000

C) $1,366,957.14

D) $1,840,000

51) Suppose that Wind Em Corp. currently has the balance sheet shown as follows, and that sales for the year just ended were $15 million. The firm also has a profit margin of 23 percent, a retention ratio of 40 percent, and expects sales of $20 million next year. If all assets and current liabilities are expected to grow with sales, how much will spontaneous liabilities increase with the increase in sales?

A) $833,333

B) $240,000

C) $366,957.14

D) $1,125,000 

52) Suppose that Wind Em Corp. currently has the balance sheet shown as follows, and that sales for the year just ended were $15 million. The firm also has a profit margin of 23 percent, a retention ratio of 40 percent, and expects sales of $20 million next year. If all assets and current liabilities are expected to grow with sales, what is the necessary increase in assets?

A) $240,000

B) $3,333,333.33

C) $1,366,957.14

D) $1,840,000

53) Suppose that Wind Em Corp. currently has the balance sheet shown as follows, and that sales for the year just ended were $15 million. The firm also has a profit margin of 19 percent, a retention ratio of 30 percent, and expects sales of $22 million next year. If all assets and current liabilities are expected to grow with sales, what is the projected increase in retained earnings?

A) $1,254,000

B) $1,240,000

C) $1,366,957.14

D) $1,840,000

54) Suppose that Wind Em Corp. currently has the balance sheet shown as follows, and that sales for the year just ended were $15 million. The firm also has a profit margin of 20 percent, a retention ratio of 30 percent, and expects sales of $22 million next year. If all assets and current liabilities are expected to grow with sales, how much will spontaneous liabilities increase with the increase in sales?

A) $1,950,000

B) $2,240,000

C) $2,366,000

D) $1,166,667

55) Suppose that Wind Em Corp. currently has the balance sheet shown as follows, and that sales for the year just ended were $12 million. The firm also has a profit margin of 20 percent, a retention ratio of 30 percent, and expects sales of $22 million next year. If all assets and current liabilities are expected to grow with sales, what is the necessary increase in assets?

A) $6,240,000

B) $6,333,333

C) $8,333,333

D) $4,833,000

56) Which of the following will increase the additional funds needed from external sources?

A) The firm's profit margin increases.

B) The firm's dividend payout ratio decreases.

C) The firm's debt ratio increases.

D) The firm becomes more capital intensive.

57) Which of the following will increase the additional funds needed from external sources?

A) The firm's profit margin increases.

B) The firm's sales forecast is decreased.

C) The firm reduces its usage of trade credit.

D) The firm's retention ratio is increased.

58) Which of the following will decrease the additional funds needed from external sources?

A) The firm's profit margin decreases.

B) The firm's retention ratio is decreased.

C) The firm becomes less capital intensive.

D) The firm reduces its usage of trade credit.

59) Which of the following statements is correct?

A) An auto manufacturer is less capital intensive than a bakery.

B) An accounting firm is more capital intensive than a railroad.

C) An oil refinery is more capital intensive than Starbucks.

D) None of the options are correct.

60) All of the following will tend to increase spontaneously with sales EXCEPT

A) accrued wages.

B) notes payable.

C) accounts payable.

D) All of the options will tend to increase spontaneously with sales.

61) Which of the following will increase a firm's need for additional funds?

A) An increase in the firm's average collection period

B) An increase in the retention ratio

C) A decrease in sales growth

D) An increase in accrued wages

62) What would be the appropriate way to forecast sales for a firm that has stable year-to-year sales, but seasonally fluctuating month-to-month sales?

A) Forecasts would need to be adjusted for a trend, but would not need a regression to adjust for seasonality.

B) Forecasts would need to be adjusted for seasonality, but would not need a regression to adjust for a trend.

C) Ignore both the trend and the seasonality.

D) None of the options.

63) Silly Putty Inc. has had sales of $12 million, $17 million, and $16 million for each of the last three years. What would be the MAPE if the actual sales were $15 million using the naïve approach?

A) 6.71 percent

B) 5.73 percent

C) −8.14 percent

D) −6.67 percent

64) Silly Putty Inc. has had sales of $12 million, $17 million, and $16 million for each of the last three years. What would be the MAPE if the actual sales were $15 million using the average approach?

A) 0.24 percent

B) 1.01 percent

C) 0 percent

D) −0.43 percent

65) Abracadabra Inc. has total assets of $106,000 and a debt ratio of 40 percent. If last year's sales were $145,000 and sales are expected to grow 10 percent in the future, what is Abracadabra's capital intensity ratio?

A) 0.73

B) 1.37

C) 0.44

D) 2.27

66) Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has $10.5 million in total assets and $1 million in current liabilities. The firm currently pays out 75 percent of its net income to shareholders. Assume that all assets and current liabilities are expected to grow with sales. If Goldilochs does not want to rely on any external sources of funds, what is the most sales can grow (in dollars)?

A) $187,900

B) $299,900

C) $328,800

D) $364,100

67) Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has $12 million in total assets and $500,000 in current liabilities. The firm currently pays out 25 percent of its net income to shareholders. Assume that all assets and current liabilities are expected to grow with sales. If Goldilochs does not want to rely on any external sources of funds, what is the most sales can grow (in dollars)?

A) $887,900

B) $867,500

C) $928,800

D) $964,100

68) Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has $12 million in total assets and $500,000 in current liabilities. The firm currently pays out 25 percent of its net income to shareholders. Assume that all assets and current liabilities are expected to grow with sales. If Goldilochs does not want to rely on any external sources of funds, what is the most sales can grow (in percent)?

A) 11.13 percent

B) 10.84 percent

C) 10.28 percent

D) 9.69 percent

69) Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has $10.5 million in total assets and $1 million in current liabilities. The firm currently pays out 75 percent of its net income to shareholders. Assume that all assets and current liabilities are expected to grow with sales. If Goldilochs does not want to rely on any external sources of funds, what is the most sales can grow (in percent)?

A) 3.18 percent

B) 2.99 percent

C) 4.11 percent

D) 3.64 percent

70) Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has $10.5 million in total assets. The firm's chief financial officer is projecting a 25 percent increase in sales. The firm has $1.25 million in accounts payable and $1,500,000 in long-term debt (bonds). The firm currently pays out 20 percent of its net income to shareholders. Assuming that all assets and spontaneous liabilities are expected to grow with sales, how much in additional funds will Goldilochs need from external sources to fund the expected growth?

A) $902,700

B) $812,500

C) $821,000

D) $746,600

71) ________ is the amount of external financing a firm must seek in order to change the assets base as necessary to support a different level of sales.

A) additional funds needed

B) capital intensity ratio

C) trade credit

D) spontaneous liabilities ratio

72) ________ is relevant assets divided by current sales.

A) additional funds needed

B) capital intensity ratio

C) trade credit

D) spontaneous liabilities ratio

73) Which of the following statements is incorrect?

A) For most businesses, increases in spontaneous liabilities will be enough to fund the necessary increases in assets.

B) The capital intensity ratio indicates the amount of assets the firm needs to invest to generate each dollar in sales.

C) The vast majority of fixed assets are "chunky" or "lumpy" since they have to be bought in non-divisible quantities.

D) All of these choices are correct.

74) Goldilochs Inc. reported sales of $8 million and net income of $2 million. The firm has a total asset turnover of 3.2. The firm's chief financial officer is projecting a $5 million increase in sales and that spontaneous liabilities will increase by $350,000 automatically. The firm currently pays out 80 percent of its net income to shareholders. Assuming that all assets and current liabilities are expected to grow with sales, how much in additional funds will Goldilochs need from external sources to fund the expected growth?

A) $501,900

B) $562,500

C) $601,800

D) $446,600

75) Goldilochs Inc. reported sales of $8 million and net income of $2 million. The firm has a total asset turnover of 1.2. The firm's chief financial officer is projecting a $6 million increase in sales and that spontaneous liabilities will increase by $1 million automatically. The firm currently pays out 50 percent of its net income to shareholders. Assuming that all assets and current liabilities are expected to grow with sales, how much in additional funds will Goldilochs need from external sources to fund the expected growth?

A) $1,250,000

B) $1,750,000

C) $2,500,000

D) $2,250,000

76) Which of the following is likely to increase the firm's additional funds needed?

A) The firm cuts its dividend by 50 percent.

B) The firm reduces its usage of trade credit.

C) The firm has unused fixed assets.

D) All of the options would increase the firm's additional funds needed.

77) Suppose a firm was planning to greatly reduce its raw materials inventory next year by introducing just-in-time inventory control procedures. Assuming no other changes to the firm's operations, what would this do to AFN?

A) It would not change the AFN.

B) The AFN would decrease.

C) The AFN would increase.

D) It cannot be determined without knowing the impact on the profit margin.

78) Which of the following statements is correct?

A) The sales forecast is the driver for corporate financial planning.

B) The addition to retained earnings is the driver for corporate financial planning.

C) The debt ratio is the driver for corporate financial planning.

D) None of the statements are correct.

79) Which of the following statements are a reason for base case projections?

A) Useful in the strategic planning process for setting internal goals.

B) For providing information to shareholders and other stakeholders concerning firm's future expectations.

C) For estimating the firm's future needs for internal and external financing

D) all of the above

80) ________ is the process of determining where a firm is going over the next year or more, how it's going to get there, and how it will know if it gets there or not.

A) financial planning

B) strategic planning.

C) base case

D) base case projections

81) Suppose you were forecasting sales for a firm that exhibited a cyclical pattern within each week. How would you go about forecasting sales for this firm?

A) You would need to compute day-of-the week indices centered on the seven days around each day of the week and use these indices to deseasonalize the historical observations

B) Calculate the monthly average because it automatically deseasonalizes the historical observations.

C) Ignore the seasonality.

D) Compute the daily change as a percent of sales and calculate the geometric average.

82) ________ assumes that future sales will be equal to the average historical value across some relevant period.

A) naïve approach

B) average approach

C) mean absolute percentage error

D) none of the above

83) Silly Putty Inc. has had sales of $10 million, $15 million, and $8 million for each of the last three years. What would be the MAPE if the actual sales were $12 million using the naïve approach?

A) 66.66 percent

B) 33.33 percent

C) −33.33 percent

D) −66.66 percent

84) Silly Putty Inc. has had sales of $10 million, $15 million, and $8 million for each of the last three years. What would be the MAPE if the actual sales were $15 million using the average approach?

A) 11.00 percent

B) 20.00 percent

C) 26.67 percent

D) 33.33 percent

85) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the naïve approach?

A) $695,000

B) $700,000

C) $750,000

D) $775,000

86) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the naïve approach?

A) $115,000

B) $140,000

C) $165,000

D) $180,000

87) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach?

A) $695,000

B) $700,000

C) $750,000

D) $775,000

88) Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach?

A) $115,000

B) $140,000

C) $165,000

D) $180,000

89) Suppose that Wind Em Corp. currently has the balance sheet shown as follows, and that sales for the year just ended were $1 million. The firm also has a profit margin of 10 percent, a retention ratio of 20 percent, and expects sales of $2 million next year. If all assets and current liabilities are expected to grow with sales, what is the necessary increase in assets?

A) $100,000

B) $250,000

C) $750,000

D) $500,000

90) Suppose that Wind Em Corp. currently has the balance sheet shown as follows, and that sales for the year just ended were $1 million. The firm also has a profit margin of 10 percent, a retention ratio of 20 percent, and expects sales of $2 million next year. If all assets and current liabilities are expected to grow with sales, how much will spontaneous liabilities increase with the increase in sales?

A) $100,000

B) $250,000

C) $200,000

D) $500,000

91) ABC Inc. has total assets of $550,000 and a debt ratio of 60 percent. If last year's sales were $950,000 and sales are expected to grow 10 percent in the future, what is ABC Inc. capital intensity ratio?

A) 1.72

B) 0.52

C) 1.90

D) 0.58