1 If sales growth for XYZ Inc exceeds 6 which in turn causes

1. If sales growth for XYZ Inc. exceeds 6%, which in turn causes XYZ to seek external financing, then 6% is the

a) External growth rate

b) Internal growth rate

c) Optimal growth rate

d) Sustainable growth rate

2. How much external funding is required for a firm projecting 12% growth has $400,000 in assets, and retained earnings of $40,000?

a) $0

b) $4,800

c) $8,000

d) $66,667

3. Funding both the seasonal and permanent asset requirements with short-term sources

a) Is the principle behind the maturity matching working capital policy

b) Represents a conservative working capital policy

c) Is the financing approach of an aggressive working capital policy

d) Is an example of the self-liquidity approach

Solution

Answer 1) b.Internal growth rate

Answer 2) c. $ 8000

Note The growth in sales = 400,000X12% = 48000

Retained earning = 40,,000

So external funding requirement = 48,000- 40,000 =8,000

Answer 3) c) Is the financing approach of an aggressive working capital policy