Finance Ch 12

  1. The most important element in financial planning is_____ forcast.
  2. If various asset categories increase, then ___ and ___ must also increase.
    • Liabilities
    • Equity
  3. As the dividend ___ ratio increase the amount of earning available to finance new assets ___.
    • payout ratio
    • decreases
  4. Retained earnings depend not only on next years sales and dividend payout ratio but also on ___ margin.
  5. The amount of assets that are tied directly to sales, Ao/S0 is often called the ___ intensity.
  6. capital intensive industry will require large amounts of ___ capital to finance growth.
    External or Additional
  7. ___ ___ ___ are funds a firm must raise externally through borrowing or by sell new common or preferred stock.
    Addition Funds Needed
  8. The faster a firms growth rate increases, the ___ the need for additional financing.
  9. ___ ___ ___ is defined as actual sales divided by the percentage of capacity at which fixed assets were operated to acheive those sales.
    Full capacity sales
  10. The ___ fixed ___ to ___ ratio is equal to the current year's actual fixed assets divieded by full capacity sales.
    • Target
    • Assets
    • Sales

    • Current Year's Fixed Assets
    • Full Capacity Sales
  11. The ___ level of ___ assets is equal to the target fixed assets to sales ratio times the projected sales.
    • Required
    • Fixed

    Target Fixed Asset Ratio x Projected Sales
  12. Corporate ___ set forth the specific goals that operatin managers are expected to meet.
  13. A ___ statement is a condensed version of a firms strategic plan.
  14. The corporate ___ defines a firm's line of business and geographic areas of operation.
  15. Corporate ___ is a broad appproach developed for acheiving a firm's goals.
  16. The ___ ratio is equal to 1 - the payout ratio.

    1 - payout ratio
  17. A ___ AFN indicates that surplus funds would be generated and available for investment.
  18. ___ of ___ occur when the ratio of a particular asset to sales will change as the size of the firm increases.
    Economies of Scale
  19. Technology dictates sometimes that fixed assets be added in large discrete units. These are called ___ assets.
  20. The ___- ___ growth rate is the maximum acheivable growth rate without having to raise external funds.
  21. Addition Funds Needed Formula
    Required increase in assets - Increase in spontaneous liabilites - Increase in Retained Earnings.

    [(A0/S0)^S] - [(L0/S0)^S] - S1 x M x (1-POR)

    • Do not include notes payable in L0
    • M = profit margin
    • POR = Dividend payout ratio
Card Set
Finance Ch 12
Ch 12 Financial Planning Terms