CORPORATE FINANCE ACCESS CARD
12th Edition
ISBN: 2810023360184
Author: Ross
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 3CQ
Summary Introduction
To discuss: Marginal cash flows.
Average revenue is the amount of revenue that is generated per unit of sales of output. Average cost is determined by the cost divided by the number of goods sold. Average cost is the aggregate of
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Calculating the margin of safety (MOS) measure will help a firm answer which of the following questions?
How much will operating profit (πB) change if sales change?
Are we using our debt wisely?
Will we break even?
How much revenue can we lose before we drop below the breakeven point?
How much operating profit (πB) will we earn?
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
Borrow short term to increase the size of the Interest Tax Shield
O Reduce credit terms to customers: i.c. make them pay sooner
O Reduce the dividend payout ratio to crcate higher levels of retained earnings
In evaluating the accuracy of your forecast, which of the following might be indicative of the need
for a revised forecast?
O The company's Dividend Payout Ratio is likely too high in the forecast period
O The growth rate of Sales is trending toward 4-5% over the forecast period
O The ratio of Sales/(Invested Capital) is much higher in the forecast period than in the Historical period from
which you derived your forecast
O The firm's Forecast D/E ratio is holding steady over the course of the forecast
An effective financial plan can be either static or dynamic (True or False)
O True
False
How can a company’s operations generate a healthy profitand yet produce meager or even negative cash flows?
Chapter 7 Solutions
CORPORATE FINANCE ACCESS CARD
Ch. 7 - Forecasting Risk What is forecasting risk? In...Ch. 7 - Sensitivity Analysis and Scenario Analysis What is...Ch. 7 - Prob. 3CQCh. 7 - Break-Even Point As a shareholder of a firm that...Ch. 7 - Prob. 5CQCh. 7 - Real Options Why does traditional NPV analysis...Ch. 7 - Real Options The Mango Republic has just...Ch. 7 - Prob. 8CQCh. 7 - Prob. 9CQCh. 7 - Project Analysis You are discussing a project...
Ch. 7 - Sensitivity Analysis and Break-Even Point We are...Ch. 7 - Prob. 2QAPCh. 7 - Prob. 3QAPCh. 7 - Prob. 4QAPCh. 7 - Prob. 5QAPCh. 7 - Prob. 6QAPCh. 7 - Prob. 7QAPCh. 7 - Prob. 8QAPCh. 7 - Prob. 9QAPCh. 7 - Prob. 10QAPCh. 7 - Prob. 11QAPCh. 7 - Prob. 12QAPCh. 7 - Prob. 13QAPCh. 7 - Prob. 14QAPCh. 7 - Prob. 15QAPCh. 7 - Prob. 16QAPCh. 7 - Prob. 17QAPCh. 7 - Prob. 18QAPCh. 7 - Prob. 19QAPCh. 7 - Prob. 20QAPCh. 7 - Prob. 21QAPCh. 7 - Prob. 22QAPCh. 7 - Prob. 23QAPCh. 7 - Prob. 24QAPCh. 7 - Prob. 25QAPCh. 7 - Prob. 26QAPCh. 7 - Prob. 28QAPCh. 7 - Prob. 29QAPCh. 7 - Prob. 30QAP
Knowledge Booster
Similar questions
- . If the company reduces its DSO without seriouslyaffecting sales, what effect would this have onfree cash flow (1) in the short run and (2) in thelong run?arrow_forwardA decrease in the costs of using an ATM causes money demand to increase. Shifting the Money demand curve to the right.Group of answer choices A. The first statement is false. The second statement is true. B. The first and second statements are both false. C. The first statement is true. The second statement is false. D. The first and second statements are both true.arrow_forwardYou are analyzing a startup company. Of course, it has a negative operating cash flow early on. But as you further analyze the company, what must you consider? Select an answer: Having a negative operating cash flow is fine if it is offset by investing activities. A negative operating cash flow is not a concern if the company has a significant amount of loans. A negative operating cash flow for a startup business is expected in the long-term. Having a negative operating cash flow is not sustainable in the long-term.arrow_forward
- Would it be possible for a company to report negative free cash flow and still be highlyvalued by investors; that is, could a negative free cash flow ever be viewed optimisticallyby investors? Explain your answer.arrow_forwardCeteris paribus, current financial market returns will increase as _____. Group of answer choices a. the uncertainty about the productivity of capital goods increases and people become more risk averse b. the uncertainty about the productivity of capital goods increases and people become less risk averse c. the uncertainty about the productivity of capital goods decreases and people become more risk averse d. the uncertainty about the productivity of capital goods decreases and people become less risk aversearrow_forwardCash conversion cycle can be reduced by reducing the payables deferral period which will slow down the payment to suppliers. Is it True or False?arrow_forward
- Cash Flow and Early Exits How much is a customer worth? How much does it cost to acquire an additional one? This is the focus of Peters' plan for a successful early exit when the business model is yet to show any profit. However, investors will also have to consider other factors. Which factors are not covered in Peters' analysis?arrow_forwardWhich explanation BEST describes John Maynard Keynes' "The Paradox of Thrift?" a. Individuals should reduce spending to cut debt. b. When an individual reduces her or his own spending, he or she reduces someone else's revenue. C. Individuals should borrow money during uncertain economic times. d. Individuals should only borrow money when times are good.arrow_forwardMany businesses finance their investment activities internally. Should internal financing affect the efficiency with which the interest rate performs its functions? No, investment is profitable if the expected rate of return is greater than the rate of interest regardless of the source of funds. Yes, investment is profitable if the expected rate of return is greater than the rate of interest regardless of the source of funds. O No, because internal financing relies on a different profit calculation. Yes, because firms are usually more anxious about what happens to money that they do not have to pay back.arrow_forward
- What type of question is finding the detail to more clearly understand why net income is decreasing when revenues are increasing? Multiple Choice What happened? What is happening? Why did it happen? What are the root causes of past results? Will it happen in the future? What is the probability something will happen? Is it forecastable? What should we do based on what we expect will happen? What should we do based on what we expect will happen? How do we optimize our performance based on potential constraints?arrow_forwardWhich one of these statements related to discounted payback is correct? Discounted payback does not require a cutoff point. O ооо The discounted payback period increases as the discount rate decreases. Payback is a better method of analysis than discounted payback. Discounted payback is used more frequently in business than payback. Discounted payback is biased towards short-term projects.arrow_forward“Investors can only get normal profit”. Give detailed explanation on this statement and apply the market efficiency theory in your answerarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning