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14 Cards in this Set

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