Question Details

Which of the following effects would occur as a result of this action 



1.	The term “additional funds needed (AFN)” is generally defined as follows:
a.	Funds that are obtained automatically from routine business transactions.
b.	Funds that a firm must raise externally from non-spontaneous sources, i.e., by borrowing or by selling new stock, to support operations.
c.	The amount of assets required per dollar of sales.
d.	The amount of internally generated cash in a given year minus the amount of cash needed to acquire the new assets needed to support growth.
e.	A forecasting approach in which the forecasted percentage of sales for each balance sheet account is held constant.
2.	Spontaneously generated funds are generally defined as follows:
a.	Assets required per dollar of sales.
b.	A forecasting approach in which the forecasted percentage of sales for each item is held constant.
c.	Funds that a firm must raise externally through borrowing or by selling new common or preferred stock.
d.	Funds that arise out of normal business operations from its suppliers, employees, and the government, and they include spontaneous increases in accounts payable and accruals.
e.	The amount of cash raised in a given year minus the amount of cash needed to finance the additional capital expenditures and working capital needed to support the firm- growth.
3.	Clayton Industries is planning its operations for next year, and  the CEO wants you to forecast the firm's additional funds needed (AFN).  Data for use in your forecast are shown below.  Based on the AFN equation, what is the AFN for the coming year?  Dollars are in millions.
Last year- sales = S0	$350	Last year- accounts payable	$40
Sales growth rate = g	30%	Last year- notes payable	$50
Last year- total assets = A*0	$500	Last year- accruals	$30
Last year- profit margin = M	5%	Target payout ratio	60%
a.	$102.8
b.	$108.2
c.	$113.9
d.	$119.9
e.	$125.9
	4.	Which of the following would, generally, indicate an improvement in a company- financial position, holding other things constant?
a.	The TIE declines.
b.	The DSO increases.
c.	The quick ratio increases.
d.	The current ratio declines.
e.	The total assets turnover decreases.
5.	Casey Communications recently issued new common stock and used the proceeds to pay off some of its short-term notes payable.  This action had no effect on the company- total assets or operating income.  Which of the following effects would occur as a result of this action?
a.	The company- current ratio increased.
b.	The company- times interest earned ratio decreased.
c.	The company- basic earning power ratio increased.
d.	The company- equity multiplier increased.
e.	The company- debt ratio increased.




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