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    LittleMiss1962's Avatar
    LittleMiss1962 Posts: 8, Reputation: 1
    New Member
    		  
    #1

    Apr 16, 2007, 05:32 PM
    Cost of goods sold
    I'm having a few problems with some questions. If anyone can help that would be great.

    1) A planner's % of sales model forcasts that sales will grow by 20% next year. If cost of goods sold are proportionate at 70% of sales, then costs of good sold will
    a. grow to 90% of sales
    b. grow in dollars by 70%
    c. not change in dollar terms
    d. increase by 20% in dollar terms

    I chose A.

    2) Which of the followng will not permit a higher internal growth rate, other things equal
    a. higher plowback ratio
    b. higher debt-to-asset ratio
    c. higher return on equity
    d. higher return on assets

    I chose B

    3) Which of the following will allow your firm to achieve its targets 16% ROA with an asset turnover of 2.5%
    a. a leverage ratio of .0667
    b. a P/E ratio of 14
    c. a profit margin of 15%
    d. a profit margin of 6.4%

    I have no clue on this one.

    Any help would be fantastic. Thank you.
    goldenbutterfly's Avatar
    goldenbutterfly Posts: 63, Reputation: 8
    Junior Member
    		  
    #2

    Apr 16, 2007, 05:42 PM
    For #1 only:)

    The answer should be D. Your % of cost of sales to sales remain at 70%. So any % increase in sales will also translate to the same % increase in COS.

    Example:

    Year 1
    Sales 1M
    COS 700t

    If Sales increase to 1.2M, then COS would increase to (1.2Mx.7) = 840T

    840T/700T=120%
    LittleMiss1962's Avatar
    LittleMiss1962 Posts: 8, Reputation: 1
    New Member
    		  
    #3

    Apr 16, 2007, 05:47 PM
    Quote Originally Posted by goldenbutterfly
    For #1 only:)

    The answer should be D. Your % of cost of sales to sales remain at 70%. So any % increase in sales will also translate to the same % increase in COS.

    Example:

    Year 1
    Sales 1M
    COS 700t

    If Sales increase to 1.2M, then COS would increase to (1.2Mx.7) = 840T

    840T/700T=120%

    Thank you for your help. I really appreciate it.
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