Question

26. The projected balance sheet forecasting method produces accurate results unless which of the following condition(s) is (are) present? Fixed assets are "lumpy." Strong economies of scale are present. c. Excess capacity exists because of a temporary recession. d. Answers a, b, and call make the projected balance sheet method inaccurate. Answers a and c make the projected balance sheet method inaccurate, but, as the text explain assumption of increasing economies of scale is built into the projected balance sheet method 27. Which of the following is a key determinant of operating leverage? Level of debt. Physical location of production facilities. Cost of debt. Technology. Capital structure. 28. Which of the following is a key determinant of financial leverage? Level of debt. Technology. Labor costs. Amount of fixed assets used by the firm. Variable cost of goods sold. os 29. Which of the following is (are) typically part of the cash budget? Payments lag. Payment for plant construction. c. Cumulative cash. All of the above. Only answers a and c above. The financial breakeven point for a firm is defined as the level of sales; EBIT. sales, gross profit. EPS: sales. gross profit; EBIT. EBIT: EPS. that produces equal to zero.

Answer 1

26. (e) because strong economies of scale doesn't have any impact on projected balance sheet.

27. (d) because it is a key determinant to find operating leverage.

28. (a) because level of equity and debt determines financial leverage.

29. (a) because payment lags are only part of cash budget.

30. (e) because level of EBIT and EPS provides break even at zero.