Corporate Finance Chapter 4 Study Guide |Question and Answer|

Corporate Finance Chapter 4 Study Guide |Question and Answer| The long-range time period, usually the next two to five years, over which the financial planning process focuses is known as the: a. planning horizon. b. planning strategy. c. planning agenda. d. short-run. e. current financing period *Ans* Planning Horizon The process by which smaller investment proposals of each of a firm's operational units are added up and treated as one big project is known as: a. separation. B. aggregation. c. conglomeration. d. appropriation. e. striation *Ans* Aggregation The financial planning method in which accounts vary depending on a firm's predicted sales level is called the _____ approach. a. percentage of sales b. sales dilution c. sales reconciliation d. common-size e. time-trend *Ans* Percentage of Sales The dividend payout ratio is calculated as: a. net income minus additions to retained earnings. b. cash dividends divided by the change in retained earnings. c. cash dividends divided by net income. d. net income minus cash dividends. e. one plus the retention ratio *Ans* Cash divideds divided by Net income The retention ratio is calculated as: a. one plus the dividend payout ratio. B. the additions to retained earnings divided by net income. c. the additions to retained earnings divided by dividends paid. d. net income minus additions to retained earnings. e. net income minus cash dividends *Ans* The additions to retained earnings / Net income The capital intensity ratio is the: a. ratio of fixed assets to current assets. b. ratio of total assets to total equity. c. amount of fixed assets required to generate $1 in sales. d. amount of total assets required to generate $1 in sales. e. the amount of sales generated from every $1 in total assets *Ans* amount of total assets required to generate 1 in sales