All else the same, which of the following management decisions would help alleviate the problem ofa buildup of excess cash?O Increase credit terms to customer; i.e. allow them more time to payBorrow short term to increase the size of the Interest Tax ShieldO Reduce credit terms to customers: i.c. make them pay soonerO Reduce the dividend payout ratio to crcate higher levels of retained earningsIn evaluating the accuracy of your forecast, which of the following might be indicative of the needfor a revised forecast?O The company's Dividend Payout Ratio is likely too high in the forecast periodO The growth rate of Sales is trending toward 4-5% over the forecast periodO The ratio of Sales/(Invested Capital) is much higher in the forecast period than in the Historical period fromwhich you derived your forecastO The firm's Forecast D/E ratio is holding steady over the course of the forecastAn effective financial plan can be either static or dynamic (True or False)O TrueFalse

To alleviate the problem of excess cash, company’s management can take following steps- Investment…

All else the same, which of the following management decisions would help alleviate the problem of a buildup of excess cash? O Increase credit terms to customer; i.e. allow them more time to pay O Borrow short term to increase the size of the Interest Tax Shield O Reduce credit terms to customers: i.e. make them pay sooner O Reduce the dividend payout ratio to create higher levels of retained eamings

All else the same, which of the following management decisions would help alleviate the problem of a buildup of excess cash? O Increase credit terms to customer; i.e. allow them more time to pay O Borrow short term to increase the size of the Interest Tax Shield O Reduce credit terms to customers: i.e. make them pay sooner O Reduce the dividend payout ratio to create higher levels of retained eamings

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter9: Corporate Valuation And Financial Planning

Section: Chapter Questions

Problem 6Q

See similar textbooks

Similar questions

A fellow student studying managerial accounting says. The net present value (NPV) weighs early receipts of cash much more heavily than more distant receipts of cash. Do you agree or disagree? Why?
Which of the following statements is correct? A. If assets and spontaneously generated liabilities are not projected to grow at the same rate as sales, then the AFN method will provide more accurate forecasts than the projected financial statement method. B. Dividends are paid with cash taken from the accumulated retained earnings account, hence dividend policy does not affect the AFN forecast. C. A negative AFN indicates that retained earnings and spontaneous capital are far more than sufficient to finance the additional assets needed. D. AFN is defined as the funds that a firm must raise internally. E. The AFN equation for forecasting funds requirements requires only a forecast of the firm’s balance sheet. Although a forecasted income statement may help clarify the results, income statement data are not essential because funds needed relate only to the balance sheet.
Which one of the following statements is correct? A. If a firm decreases its inventory period, its accounts receivable period will also decrease. B. The longer the cash cycle, the more cash a firm typically has available to invest. C. A firm would prefer a negative cash cycle over a positive cash cycle. D. Decreasing the inventory period will also decrease the payables period. E. Both the operating cycle and the cash cycle must be positive values.
Briefly summarise the findings of Penman and Sougiannis (1998) concerning the ex-post performance of the abnormal earnings method, the dividend discount model and the discounted cash flow method. b) Explain what Business Strategy Analysis is and why it is a prerequisite for understanding the results of our ratio analysis, and for making good forecasts in the context of our Prospective Analysis. c) When making forecasts for the growth rate of FCF (free cash flows) in the posthorizon period, how would you decide what growth rate to choose? What would be the rationale behind a zero growth assumption? d) Imagine that you are comparing the financial performance of two companies using ratio analysis as part of your Financial Analysis. Provide an example of why you need to perform Accounting Analysis first. Your example should describe (in some detail) one of the following: (i) differences in revenue recognition (ii) differences in the recognition of cost of sales (iii) differences in the…
The company’s usage of the Baumol model in cash management involves trade-off. A decrease in the optimal transaction size would more likely result from Decrease of debt to asset ratio Increase of return on marketable securities None of the choices is correct Increase in the annual demand for cash
Which of the following actions should Reece Windows take if it wants to reduce its cash conversion cycle? a. Take steps to reduce the DSO. b. Sell an issue of long-term bonds and use the proceeds to buy back some of its common stock. c. Increase average inventory without increasing sales. d. Sell common stock to retire long-term bonds. e. Start paying its bills sooner, which would reduce the average accounts payable but not affect sales.
Which of the following is false? a. Baumol model helps firm to find out their desirable level of cash balance under certainty b. Any presence of a cash buffer affects the cost of holding cash and ultimately the annual cost of cash for a particular firm c. A higher average daily disbursement float than average daily collection float is more desirable for a firm d. Accounts payable increase the number of days a firm’s resources are tied up in the operating cycle
The company’s usage of the Baumol model in cash management involves trade-off. A decrease in the optimal transaction size would more likely result from a. Increase of return on marketable securities b. None of the choices is correct c. Increase in the annual demand for cash d. Decrease of debt to asset ratio
Which of the following actions should Paperang Inc. take if it wants to reduce its cash conversion cycle? a. Sell common stock to retire long-term bonds. b. Sell an issue of long-term bonds and use the proceeds to buy back some of its common stock. c. Take steps to reduce the DSO. d. Start paying its bills sooner, which would reduce the average accounts payable but not affect sales. e. Increase average inventory without increasing sales.
Which of the following is true? a. If the payment term of n/20 shifted to 5/10, n/20 to start offering customers a cash discount, assuming sales remain to be constant, the day sales outstanding of the firm will likely shorten b. If a firm’s volume of credit sales decreases, then its liquidity ratios will also decrease. c. Relatively more restrictive credit term as comparing to other firms within the same industry will have a potential increase in sales d. High assets turnover is being reflected by inefficiencies present in the management of inventory
Practice : a: The computation of return on average investment ignores one characteristic of the earnings stream, which is considered in discounting cash flows. What is this characteristic? Why is it important? b: What are the disadvantages of evaluating an investment using payback period? Why might a company use this methodology despite these disadvantages?
Which of the following is NOT a conclusion drawn from M&M's Propositions 1 and 2? a. Shareholder's required return rises with leverage. b. The WACC does not change as capital structure change. c. Firm value is determined by the left hand of the balance sheet the firm's assets, and the cash flow generated by them. d. The WACC is determined by the riskiness of the company's business (assets). e. A firm can change its market value by splitting its cash flows into different streams.