Corporate Finance

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Chapter 04
Long-Term Financial Planning and Growth

Multiple Choice Questions 1. Phil is working on a financial plan for the next three years. This time period is referred to as which one of the following?
A. financial range
B. planning horizon
C. planning agenda
D. short-run
E. current financing period 2. Atlas Industries combines the smaller investment proposals from each operational unit into a single project for planning purposes. This process is referred to as which one of the following?
A. conjoining
B. aggregation
C. conglomeration
D. appropriation
E. summation 3. Which one of the following terms is applied to the financial planning method which uses the projected sales level as the basis for
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III. Should a particular division be sold?
IV. Should a new product be introduced?
A. I, II, and III only
B. I, II, and IV only
C. I, III, and IV only
D. II, III, and IV only
E. I, II, III, and IV 13. Which one of the following statements concerning financial planning for a firm is correct?
A. Financial planning for fixed assets is done on a segregated basis within each division.
B. Financial plans often contain alternative options based on economic developments.
C. Financial plans frequently contain conflicting goals.
D. Financial plans assume that firms obtain no additional external financing.
E. The financial planning process is based on a single set of economic assumptions. 14. You are getting ready to prepare pro forma statements for your business. Which one of the following are you most apt to estimate first as you begin this process?
A. fixed assets
B. current expenses
C. sales forecast
D. projected net income
E. external financing need 15. Which one of the following statements is correct?
A. Pro forma statements must assume that no new equity is issued.
B. Pro forma statements are projections, not guarantees.
C. Pro forma statements are limited to a balance sheet and income statement.
D. Pro forma financial statements must assume that no dividends will be paid.
E. Net working capital needs are excluded from pro forma computations. 16. When utilizing the percentage of sales approach, managers:
I. estimate company

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