Spontaneous Funds Are Generally Defined as Follows

question 3

Multiple Choice

Spontaneous funds are generally defined as follows:

• A) Assets required per dollar of sales.
• B) A forecasting approach in which the forecasted percentage of sales for each item is held constant.
• C) Funds that a firm must raise externally through short-term or long- term borrowing and/or by selling new common or preferred stock.
• D) Funds that arise out of normal business operations from its suppliers, employees, and the government, and they include immediate increases in accounts payable, accrued wages, and accrued taxes.
• E) The amount of cash raised in a given year minus the amount of cash needed to finance the additional capital expenditures and working capital needed to support the firm's growth.

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Definitions:

Debt-equity Ratio

A measure of a company's financial leverage, calculated by dividing its total liabilities by stockholders' equity.

Price/earnings Ratio

A valuation metric for a stock, calculated as the market price per share divided by the earnings per share.

Share Repurchase

A corporate action in which a company buys back its own shares from the marketplace, which can increase the value of remaining shares.

Retention Ratio

The proportion of net income that is retained in the business rather than paid out to shareholders, indicating the company's reinvestment rate.