1.

Which one of the following terms is defined as dividends paid expressed as a percentage of net
income?
A. dividend retention ratio
B. dividend yield
C. dividend payout ratio
D. dividend portion

2. Which one of the following correctly defines the retention ratio?
A. one plus the dividend payout ratio
B. addition to retained earnings divided by net income
C. net income minus additions to retained earnings
D. net income minus cash dividends
3. The internal growth rate of a firm is best described as the:
A. minimum growth rate achievable assuming a 100 percent retention ratio.
B. maximum growth rate achievable excluding external financing of any kind.
C. maximum growth rate achievable excluding any external equity financing while maintaining a
constant debt-equity ratio.
D. maximum growth rate achievable with unlimited debt financing.
4. You are developing a financial plan for a corporation. Which of the following questions will
be considered as you develop this plan?
I. How much net working capital will be needed?
II. Will additional fixed assets be required?
III. Will dividends be paid to shareholders?
IV. How much new debt must be obtained?
A. I and IV only
B. II and III only
C. I, III, and IV only
D. II, III, and IV only
E. I, II, III, and IV
5. Financial planning:
A. focuses solely on the short-term outlook for a firm.
B. is a process that firms employ only when major changes to a firm's operations are anticipated.
C. is a process that firms undergo once every five years.
D. considers multiple options and scenarios for the next two to five years.

6. 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. sales forecast
C. projected net income
D. external financing need
7. When constructing a pro forma statement, net working capital generally:
A. remains fixed.
B. varies only if the firm is currently producing at full capacity.
C. varies only if the firm is producing at less than full capacity.
D. varies proportionally with sales.
8. AA co, which is currently operating at full capacity, has sales of RM29,000, current assets of
RM 2,800, current liabilities of RM 1,800, net fixed assets of RM 32,500, and a 5 percent profit
margin. 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 5.5 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?
A. RM 312.75
B. RM 201.19
C. RM 967.30
D. RM 1,099.08

9. Miller Bros. Hardware is operating at full capacity with a sales level of RM 726,500 and fixed
assets of RM 586,000. The profit margin is 7 percent. What is the required addition to fixed
assets if sales are to increase by 10 percent?
A. RM 28,200.50
B. RM 39,200.80
C. RM 49.800.99
D. RM 58,599.49

10. Designer's Outlet has a capital intensity ratio of 0.82 at full capacity. Currently, total assets
are RM 68,900 and current sales are RM 72,300. At what level of capacity is the firm currently
operating?
A. 86 percent
B. 89 percent
C. 91 percent
D. 96 percent

11. The Two Sisters has a 9 percent return on assets and a 75 percent retention ratio. What is the
internal growth rate?
A. 6.50 percent
B. 6.97 percent
C. 7.24 percent
D. 7.38 percent