ESSENTIALS CORPORATE FINANCE + CNCT A.
9th Edition
ISBN: 9781259968723
Author: Ross
Publisher: MCG CUSTOM
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Chapter 3, Problem 41QP
Growth and Assets. A firm wishes to maintain an internal growth rate of 6.8 percent and a dividend payout ratio of 25 percent. The current profit margin is 7.3 percent and the firm uses no external financing sources. What must total asset turnover be?
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Internal growth rate 6.40%
Payout ratio 25%
Profit margin 5.70%
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ratio of 20 percent. The current profit margin is 6.3 percent, and the firm uses no
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Chapter 3 Solutions
ESSENTIALS CORPORATE FINANCE + CNCT A.
Ch. 3.1 - Why is it often necessary to standardize financial...Ch. 3.1 - Prob. 3.1BCQCh. 3.2 - What are the five groups of ratios? Give two or...Ch. 3.2 - Turnover ratios all have one of two figures as...Ch. 3.2 - Profitability ratios all have the same figure in...Ch. 3.2 - Given the total debt ratio, what other two ratios...Ch. 3.3 - Return on assets, or ROA, can be expressed as the...Ch. 3.3 - Return on equity, or ROE, can be expressed as the...Ch. 3.4 - What does a firms internal growth rate tell us?Ch. 3.4 - What does a firms sustainable growth rate tell us?
Ch. 3.4 - Why is the sustainable growth rate likely to be...Ch. 3.5 - Prob. 3.5ACQCh. 3.5 - Prob. 3.5BCQCh. 3.5 - Prob. 3.5CCQCh. 3.5 - Prob. 3.5DCQCh. 3 - Section 3.1A common-size balance sheet expresses...Ch. 3 - What are the categories of traditional financial...Ch. 3 - Prob. 3.3CCh. 3 - Prob. 3.4CCh. 3 - Prob. 3.5CCh. 3 - Current Ratio. What effect would the following...Ch. 3 - Current Ratio and Quick Ratio. In recent years,...Ch. 3 - Prob. 3CTCRCh. 3 - Financial Ratios. Fully explain the kind of...Ch. 3 - Standardized Financial Statements. What types of...Ch. 3 - Prob. 6CTCRCh. 3 - Prob. 7CTCRCh. 3 - Prob. 8CTCRCh. 3 - Industry-Specific Ratios. So-called same-store...Ch. 3 - Industry-Specific Ratios. There are many ways of...Ch. 3 - Prob. 11CTCRCh. 3 - Financial Statement Analysis. In the previous...Ch. 3 - Prob. 1QPCh. 3 - Calculating Profitability Ratios. Aguilera, Inc.,...Ch. 3 - Calculating the Average Collection Period. Ordonez...Ch. 3 - Calculating Inventory Turnover. Bobaflex...Ch. 3 - Calculating Leverage Ratios. Fincher, Inc., has a...Ch. 3 - Calculating Market Value Ratios. Rossdale, Inc.,...Ch. 3 - Prob. 7QPCh. 3 - DuPont Identity. Jiminy Cricket Removal has a...Ch. 3 - Calculating Average Payables Period. For the past...Ch. 3 - Equity Multiplier and Return on Equity. Shelton...Ch. 3 - Internal Growth. If Williams, Inc., has an ROA of...Ch. 3 - Sustainable Growth. If the Crash Davis Driving...Ch. 3 - Sustainable Growth. Based on the following...Ch. 3 - Prob. 14QPCh. 3 - Prob. 15QPCh. 3 - Calculating Financial Ratios. Based on the balance...Ch. 3 - DuPont Identity. Suppose that the Bethesda Mining...Ch. 3 - Prob. 18QPCh. 3 - Return on Assets. Beckinsale, Inc., has a profit...Ch. 3 - Calculating Internal Growth. The most recent...Ch. 3 - Calculating Sustainable Growth. For Shinoda...Ch. 3 - Total Asset Turnover. Kalebs Karate Supply had a...Ch. 3 - Return on Equity. Carroll, Inc., has a total debt...Ch. 3 - Market Value Ratios. Ames, Inc., has a current...Ch. 3 - Prob. 25QPCh. 3 - Enterprise ValueEBITDA Multiple. The market value...Ch. 3 - Prob. 27QPCh. 3 - Ratios and Fixed Assets. The Smathers Company has...Ch. 3 - Prob. 29QPCh. 3 - Prob. 30QPCh. 3 - Prob. 31QPCh. 3 - Calculating the Times Interest Earned Ratio. For...Ch. 3 - Return on Assets. A fire has destroyed a large...Ch. 3 - Prob. 34QPCh. 3 - SMOLIRA GOLF. INC. 2016 Income Statement Sales...Ch. 3 - Prob. 36QPCh. 3 - Market Value Ratios. Smolira Golf has 10,000...Ch. 3 - Interpreting Financial Ratios. After calculating...Ch. 3 - Growth and Profit Margin. Fulkerson Manufacturing...Ch. 3 - Market Value Ratios. Abercrombie Fitch and...Ch. 3 - Growth and Assets. A firm wishes to maintain an...Ch. 3 - Prob. 42QPCh. 3 - Prob. 43QPCh. 3 - Constraints on Growth. High Flyer, Inc., wishes to...Ch. 3 - Internal and Sustainable Growth Rates. Best Buy...Ch. 3 - Expanded DuPont Identity. Hershey Co. reported the...Ch. 3 - Ratios and Financial Planning at SS Air, Inc....Ch. 3 - Prob. 2CCCh. 3 - Prob. 3CCCh. 3 - Ratios and Financial Planning at SS Air, Inc....
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- Considering each action independently and holding other things constant, which of the following actions would reduce a firm’s need for additional capital? a. An increase in the dividend payout ratio. b. A decrease in the days sales outstanding. c. An increase in expected sales growth. d. A decrease in the profit margin. When the company is working at full capacity, the assets in the AFN equation is the fixed assets only True Falsearrow_forwardYou've collected the following information about Groot, Inc.: Profit margin Total asset turnover Total debt ratio Payout ratio = 4.44% = 3.50 = .25 = 29% a. What is the sustainable growth rate for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the ROA? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Sustainable growth rate b. ROA % 15.54 %arrow_forwardA firm wishes to maintain an internal growth rate of 8.25 percent and a dividend payout ratio of 37 percent. The current profit margin is 5.9 percent and the firm uses no external financing sources. What must total asset turnover be? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Total asset turnover timesarrow_forward
- Which of the following statements is correct? A. a. Since accounts payable and accruals must eventually be paid, as these accounts increase, AFN also increases. B. b. Suppose a firm is operating its fixed assets below 100 percent capacity but is at 100 percent with respect to current assets. If sales grow, the firm can offset the needed increase in current assets with its idle fixed assets capacity. C. c. If a firm retains all of its earnings, then it will not need any additional funds to support sales growth. D. d. Additional funds needed are typically raised from some combination of notes payable, long-term bonds, and common stock. These accounts are nonspontaneous in that they require an explicit financing decision to increase them. E. e. All of the statements above are false.arrow_forwardWhen the company is working at full capacity, the assets in the AFN equation is the total assets True False Considering each action independently and holding other things constant, which of the following actions would reduce a firm’s need for additional capital? a. An increase in the dividend payout ratio. b. A decrease in the days sales outstanding. c. An increase in expected sales growth. d. A decrease in the profit margin.arrow_forwardWhich of the following is true? I. If there is no change in gross fixed assets from one year to the next, then net fixed assets would have to have decreased. II. For firms with lower P/E ratios, investors are valuing each dollar of earnings more than for firms with higher P/E ratios. III. A increase in the current ratio indicates an improvement in a firm's long-term solvency condition.arrow_forward
- Which one of the following will decrease the net working capital of a firm? Assume the current ratio is greater than 1.0. A. selling inventory at cost B. collecting payment from a customer C. paying a payment on a long-term debt D. selling a fixed asset for book value E. paying a supplier for the purchase of an inventory itemarrow_forwardWhich of the following assumptions are necessary for AFN equation to work? 1) The ratios A0/S and LO/S, the profit margin, and payout ratio are stable. 2) Common stock and long-term debt are tied directly to sales. 3) None of the firm's ratios will change. 4) Fixed assets, but not current assets, are tied directly to sales. 5) Last year's total assets were not optimal for last year's sales.arrow_forwardWhich of the following actions can a firm take to increase its current ratio? A. Issue short-term debt and use the proceeds to buy back long-term debt with a maturity of more than one year. B. Reduce the company's days sales outstanding to the industry average and use the resulting cash savings to purchase plant and equipment. C. Use cash to purchase additional inventory. D. Statements a and b are correct. E. None of the statements above is correct.arrow_forward
- A firm wants to strengthen its financial position. Which of the following actions would increase its current ratio? 1. b. Reduce the company's days' sales outstanding to the industry average and use the resulting cash savings to purchase plant and equipment. 2. d. Borrow using short-term debt and use the proceeds to repay debt that has a maturity of more than one year. 3. e. Issue new stock and then use some of the proceeds to purchase additional inventory and hold the remainder as cash. 4. a. Use cash to increase inventory holdings. 5. c. Use cash to repurchase some of the company's own stock.arrow_forwardA firm with a below industry net profit margin can improve its return on total assets by: a. increasing its current ratio c. decreasing its fixed asset turnover b. decreasing its total asset turnover d. increasing its total asset turnoverarrow_forward13. A short-term creditor would be interested in A. profitability ratio. B. efficiency ratio. C. liquidity ratio. D. leverage ratio. The quick ratio of a firm would be unaffected by which of the following? 14. A. Land held for investment is sold for cash. B. Equipment is purchased, financed by a long-term debt issue. C. Inventories are sold for cash D. Inventories are sold on a credit basis.arrow_forward
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