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14 Cards in this Set
- Front
- Back
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Pro forma financial statements are:
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projected accounting statements based on a sales forecast
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The financial planning method in which accounts vary depending on a firm’s predicted sales level is called the _____ approach.
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percentage of sales
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The dividend payout ratio is calculated as:
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cash dividends divided by net income
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The retention ratio is calculated as:
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the additions to retained earnings divided by net income
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The sustainable growth rate of a firm is best described as the:
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maximum growth rate achievable without using any external equity financing, and while maintaining a constant debt-equity ratio
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When fixed assets on a pro forma statement are projected to increase at a rate equivalent to the projected rate of sales growth, it can be assumed that the firm is
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operating at full capacity
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Any external financing need is generally covered by:
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adjusting the level of debt or equity
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Why do we do financial forecasting?
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To predict how much financing our firm will need in the future.
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What are non-spontaneous accounts?
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Accounts that do not change automatically in proportion of sales.
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What is the difference between the DuPont breakdown of ROE and SGR?
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SGR includes the dividend policy
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What does a nonrevolving line of credit entail?
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Fixed-rate (non-adjustable) pre-arranged financing from a bank.
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If you invest money today and you want it to grow for retirement, what process are you counting on?
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compounding
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What do we call an equally-spaced sequence of equal cash flows?
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annuity
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The process of finding the present value of some future amount is often called:
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discounting
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