Exam 2 Review
When preparing pro forma statements, which one of the following is an
analyst most likely to estimate first?
Projected sales
When utilizing the percentage of sales approach, managers:
consider the current production capacity level.
A pro forma statement indicates that both sales and fixed assets are projected
to increase by 7 percent over their current levels. Given this, you can safely
assume the firm:
is currently operating at full capacity.
A firm is operating at less than 100 percent of capacity. When preparing pro
forma statements, this information is primarily needed to project which one of
the following account values?
Fixed assets
Wei Bridal is a profitable firm with a dividend payout ratio of 25 percent. The
firm does not want to issue additional equity shares nor increase its long-term
debt. Which one of the following defines the maximum rate at which this firm
can currently grow?
Internal growth rate
, Zeng Systems is currently operating at full capacity. The firm, has sales of
$47,000, current assets of $5,100, current liabilities of $6,200, net fixed assets
of $51,500, and a net profit margin of 5 percent. The firm has no long-term
debt and does not plan on acquiring any. The firm does not pay any
dividends. Sales are expected to increase by 3 percent next year. If all assets,
short-term liabilities, and costs vary directly with sales, how much additional
equity financing is required for next year?
−$908.50
Projected assets = ($5,100 + 51,500)(1.03)Projected assets = $58,298
Projected liabilities = $6,200(1.03)Projected liabilities = $6,386 Current equity
= $5,100 + 51,500 − 6,200Current equity = $50,400 Projected increase in
retained earnings = $47,000(.05)(1.03)Projected increase in retained earnings
= $2,420.50 Equity funding needed = $58,298 − 6,386 − 50,400 −
2,420.50Equity funding needed= −$908.50
With a sales level of $547,200 and fixed assets of $471,000, Esquivel's is
operating at full capacity. The net profit margin is 5.4 percent. If sales are to
increase by 4 percent, what is the required addition to fixed assets?
$18,840
Required addition to fixed assets = (.04)$471,000Required addition to fixed
assets = $18,840
Ace Custom Metal has annual sales of $56,900 and is currently operating at
86 percent of capacity. What is the level of sales at full capacity?Ace Custom
Metal has annual sales of $56,900 and is currently operating at 86 percent of
capacity. What is the level of sales at full capacity
$66,163
