FIN 420 EXAM 3 CH 14 18 RISK
MANAGEMENT DERIVATIVES HEDGING
TECHNIQUES OPTIONS FUTURES
STRATEGY QUESTION BANK
●● What are some actions you could take if you project a deficit of
funds available to fund your projected assets?
Take out a loan from the bank
Issue more shares
Issue bonds
Lower the dividend payout ratio
Answer: All of the above
●● True/False: Firms that have higher retained earnings will need fewer
additional funds to finance their growth, all else equal.
Answer: True
,●● Issuing new short-term bonds to finance an expansion is an example
of spontaneous financing.
True
False
Answer: False
●● The percent of sales method can be used to forecast:
expenses
assets
liabilities
all of the above
Answer: All of the above
●● Financial forecasting is the process of attempting to estimate a firm's
future financing requirements.
True
,False
Answer: True
●● Fixed assets are often estimated incorrectly by the percent of sales
method because
fixed assets remain constant and the percent of sales method assumes all
assets increase proportionally with sales.
fixed asset are very expensive.
fixed assets are typically purchased in "lumps" and therefore do not
increase proportionally with sales.
fixed assets are part of the capital budgeting process.
Answer: fixed assets are typically purchased in "lumps" and therefore do
not increase proportionally with sales.
●● The key ingredient in a firm's financial planning is an accurate sales
forecast.
True
, False
Answer: True
●● Potential sources of financing to support an increase in sales include
all of the following EXCEPT
increase in the dividend payout ratio.
increase in spontaneous liabilities.
increase in accounts payable.
issuance of bonds and/or common stock.
Answer: increase in the dividend payout ratio
●● Discretionary financing accounts include all of the following
EXCEPT
long-term debt.
notes payable.
MANAGEMENT DERIVATIVES HEDGING
TECHNIQUES OPTIONS FUTURES
STRATEGY QUESTION BANK
●● What are some actions you could take if you project a deficit of
funds available to fund your projected assets?
Take out a loan from the bank
Issue more shares
Issue bonds
Lower the dividend payout ratio
Answer: All of the above
●● True/False: Firms that have higher retained earnings will need fewer
additional funds to finance their growth, all else equal.
Answer: True
,●● Issuing new short-term bonds to finance an expansion is an example
of spontaneous financing.
True
False
Answer: False
●● The percent of sales method can be used to forecast:
expenses
assets
liabilities
all of the above
Answer: All of the above
●● Financial forecasting is the process of attempting to estimate a firm's
future financing requirements.
True
,False
Answer: True
●● Fixed assets are often estimated incorrectly by the percent of sales
method because
fixed assets remain constant and the percent of sales method assumes all
assets increase proportionally with sales.
fixed asset are very expensive.
fixed assets are typically purchased in "lumps" and therefore do not
increase proportionally with sales.
fixed assets are part of the capital budgeting process.
Answer: fixed assets are typically purchased in "lumps" and therefore do
not increase proportionally with sales.
●● The key ingredient in a firm's financial planning is an accurate sales
forecast.
True
, False
Answer: True
●● Potential sources of financing to support an increase in sales include
all of the following EXCEPT
increase in the dividend payout ratio.
increase in spontaneous liabilities.
increase in accounts payable.
issuance of bonds and/or common stock.
Answer: increase in the dividend payout ratio
●● Discretionary financing accounts include all of the following
EXCEPT
long-term debt.
notes payable.
