Analysis of a company’s financial statements: Below are simplified versions of the balance sheet and income statement for Toys by Tom, Inc. Use this information to answer question 10.

A 15% increase in inventory turns for Toys by Tom, Inc. would bring this ratio to ____, suggesting ________ in ________.

• 11.

  The cash cycle measures the days required to produce finished goods or delivered services.

  • 13.

    The sustainable growth rate is the maximum growth rate achievable over an extended period of time.

    • 14.

      The cash conversion cycle is calculated as:

      • 15.

        Which of following are sources of cash in a statement of sources and uses?

        I. Collection of accounts receivables
        II. Reduction of long-term debt
        III. Payment of dividends
        IV. Reduction in the cash account

        • 16.

          Which of the following actions, all else being equal, will increase the sustainable growth rate?

          • 17.

            Biases can and should always be eliminated in financial forecasts.

            • 18.

              Which of the following is commonly forecasted as a percent of sales:

              • 19.

                External funding needs are computed as:

                • 20.

                  A perpetuity is a stream of cash flows that lasts forever.

                  • 21.

                    The higher the opportunity cost of capital the higher the NPV.

                    • 22.

                      A project with an internal rate of return greater than the cost of capital should always be accepted.

                      • 23.

                        The phenomenon of compounding connotes which of the following?

                        • 24.

                          If you invest $2,000 today for three years at 5% interest paid annually, you will earn a total of $_____ in interest. Assume you re-invest all interest.

                          • 25.

                            Enterprise Free Cash Flows should include:

                            I. Capital expenditures
                            II. Financing costs
                            III. Taxes
                            IV. Working capital requirements

                            • 26.

                              You are trying to decide whether to accept or reject a one-year project. The project is estimated to generate $5,000 in incremental gross profit, which includes $200 in depreciation. Incremental SG&A expense is $400. At a 35% tax rate, the after-tax incremental cash flow is:

                              • 27.

                                You are saving money for a down payment on a house. Suppose you want to have total savings of $20,000 in 10 years time and you have currently $5,000. What annual interest rate do you need to earn on your initial investment, assuming you contribute no additional savings?

                                • 28.

                                  What is the present value of a growing perpetuity that makes a payment of $100 in the first year, which thereafter grows at 3% per year? Apply a discount rate of 7%.