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CHAPTER 12
FINANCIAL PLANNING AND FORECASTING FINANCIAL
STATEMENTS
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
Please see the preface for information on the AACSB letter indicators (F, M, etc.) on the subject
lines.
Multiple Choice: True/False
(12.1) Mission statement Answer: a EASY
1. The mission statement is a statement of the firm's overall purpose.
a. True
b. False
(12.1) Corporate strategies Answer: b EASY

2. Once a firm has defined its purpose, scope, and objectives, it must
develop a strategy for achieving its goals. Corporate strategies are
detailed plans rather than broad approaches.
a. True
b. False
(12.2) Sales forecast Answer: a EASY

3. The first, and most critical, step in constructing a set of forecasted
financial statements is the sales forecast.
a. True
b. False
(12.2) Sales forecast Answer: a EASY

4. A typical sales forecast, though concerned with future events, will
usually be based on recent historical trends and events as well as on
forecasts of economic prospects.
a. True
b. False
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to a publicly accessible website, in whole or in part.
Chapter 12 True/False Page 1
(12.2) Sales forecast Answer: b EASY
5. Errors in the sales forecast can be offset by similar errors in costs
and income forecasts. Thus, as long as the errors are not large, sales
forecast accuracy is not critical to the well-being of the firm.
a. True
b. False
Page 2 True/False Chapter 12

(12.3) Spontaneous liabilities Answer: a EASY
6. As a firm's sales grow, its current assets also tend to increase. For
instance, as sales increase, the firm's inventories generally increase,
and purchases of inventories result in more accounts payable. Thus,
spontaneous liabilities that reduce AFN arise from transactions brought
on by sales increases.
a. True
b. False
(12.3) Spontaneous liabilities Answer: b EASY

7. Firms pay a low interest rate on spontaneous liabilities so these funds
are its cheapest source of capital. Consequently, the firm should make
arrangements with its suppliers to use as much of this credit as
possible.
a. True
b. False
(12.3) Spontaneous liabilities Answer: a EASY

8. A firm will use spontaneous funds to the extent possible; however, due
to credit terms, contracts with workers, and tax laws there is little
flexibility in their usage.
a. True
b. False
(12.3) Addition to ret. earnings Answer: a EASY

9. As long as a firm does not pay out 100% of its earnings, the firm's
annual profit that is retained in the business (i.e., the addition to
retained earnings) is another source of funds for a firm's expansion.
a. True
b. False
(12.3) Asset increase Answer: a EASY

10. A rapid build-up of inventories normally requires additional financing,
unless the increase is matched by an equally large decrease in some
other asset.
a. True
b. False
(12.3) Additional funds needed Answer: a EASY
11. A firm's AFN must come from external sources. Typical sources include
short-term bank loans, long-term bonds, preferred stock, and common
stock.
a. True
b. False

(12.3) Additional funds needed Answer: b EASY
12. If a firm wants to maintain its ratios at their existing levels, then
if it has a positive sales growth rate of any amount, it will require
some amount of external funding.
a. True
b. False
(12.3) Additional funds needed Answer: b EASY

13. To determine the amount of additional funds needed (AFN), you may
subtract the expected increase in liabilities, which represents a
source of funds, from the sum of the expected increases in retained
earnings and assets, both of which are uses of funds.
a. True
b. False
(12.3) Capital intensity ratio Answer: a EASY

14. The capital intensity ratio is the amount of assets required per dollar
of sales and it has a major impact on a firm's capital requirements.
a. True
b. False
(12.4) Forecasted statements Answer: a EASY

15. One of the first steps in arriving at a firm's forecasted financial
statements is a review of industry-average operating ratios relative to
these same ratios for the firm to determine whether changes to the
ratios need to be made.
a. True
b. False
(12.1) Operating plans Answer: b MEDIUM

16. Operating plans sketch out broad approaches for realization of the
firm's strategic vision. These plans usually are developed for a
period no longer than a 1-year time horizon because detail is "lost" by
extending out the time horizon by more than 1 year.
a. True
b. False
(12.1) Financial plans Answer: a MEDIUM
17. One of the necessary steps in the financial planning process is a
forecast of financial statements under each alternative version of the
operating plan in order to analyze the effects of different operating
procedures on projected profits and financial ratios.
a. True
b. False

(12.3) Additional funds needed Answer: a MEDIUM
18. If a firm with a positive net worth is operating its fixed assets at
full capacity, if its dividend payout ratio is 100%, and if it wants to
hold all financial ratios constant, then for any positive growth rate
in sales, it will require external financing.
a. True
b. False
(12.3) Additional funds needed Answer: b MEDIUM

19. A firm's profit margin is 5%, its debt/assets ratio is 56%, and its
dividend payout ratio is 40%. If the firm is operating at less than
full capacity, then sales could increase to some extent without the
need for external funds, but if it is operating at full capacity with
respect to all assets, including fixed assets, then any positive growth
in sales will require some external financing.
a. True
b. False
(12.3) Capital intensity ratio Answer: b MEDIUM

20. Companies with relatively high assets-to-sales ratios require a
relatively large amount of new assets for any given increase in sales;
hence, they have a greater need for external financing. There are
currently no alternatives for these types of firms to lower their asset
requirements.
a. True
b. False
(12.3) Capital intensity ratio Answer: a MEDIUM

21. Firms with high capital intensity ratios have found ways to lower this
ratio permitting them to achieve a given level of growth with fewer
assets and consequently less external capital. For example, just-in-
time inventory systems, multiple shifts for labor, and outsourcing
production are all feasible ways for firms to reduce their capital
intensity ratios.
a. True
b. False
(12.3) Capital intensity ratio Answer: a MEDIUM
22. Two firms with identical capital intensity ratios are generating the
same amount of sales. However, Firm A is operating at full capacity,
while Firm B is operating below capacity. If the two firms expect the
same growth in sales during the next period, then Firm A is likely to
need more additional funds than Firm B, other things held constant.
a. True
b. False

(12.3) Capital intensity ratio Answer: b MEDIUM
23. If a firm's capital intensity ratio (A0*/S0) decreases as sales
increase, use of the AFN formula is likely to understate the amount of
additional funds required, other things held constant.
a. True
b. False
(12.3) Sustainable growth rate Answer: b MEDIUM

24. The minimum growth rate that a firm can achieve with no access to
external capital is called the firm's sustainable growth rate. It can
be calculated by using the AFN equation with AFN equal to zero and
solving for g.
a. True
b. False
(12.4) Financial forecasting Answer: b MEDIUM

25. The fact that long-term debt and common stock are raised infrequently
and in large amounts lessens the need for the firm to forecast those
accounts on a continual basis.
a. True
b. False
(12.5) Forecasting when ratios chg. Answer: a MEDIUM

26. The AFN equation assumes that the ratios of assets and liabilities to
sales remain constant over time. However, this assumption can be
relaxed when we use the forecasted financial statement method. Three
conditions where constant ratios cannot be assumed are economies of
scale, lumpy assets, and excess capacity.
a. True
b. False
Multiple Choice: Conceptual

(12.1) Strategic planning Answer: c EASY
27. Which of the following is NOT a key element in strategic planning as it
is described in the text?
a. The mission statement.

b. The statement of the corporation’s scope.
c. The statement of cash flows.
d. The statement of corporate objectives.
e. The corporation's strategies.
Chapter 12 Conceptual M/C Page 9

(12.3) AFN equation Answer: b EASY
28. Which of the following assumptions is embodied in the AFN equation?
a. None of the firm's ratios will change.

b. Accounts payable and accruals are tied directly to sales.
c. Common stock and long-term debt are tied directly to sales.
d. Fixed assets, but not current assets, are tied directly to sales.
e. Last year’s total assets were not optimal for last year’s sales.
(12.3) Additional funds needed Answer: a EASY/MEDIUM

29. Jefferson City Computers has developed a forecasting model to estimate
its AFN for the upcoming year. All else being equal, which of the
following factors is most likely to lead to an increase of the
additional funds needed (AFN)?
a. A sharp increase in its forecasted sales.

b. A switch to a just-in-time inventory system and outsourcing
production.
c. The company reduces its dividend payout ratio.
d. The company switches its materials purchases to a supplier that
sells on terms of 1/5, net 90, from a supplier whose terms are 3/15,
net 35.
e. The company discovers that it has excess capacity in its fixed
assets.
(12.3) Additional funds needed Answer: b EASY/MEDIUM

30. The term “additional funds needed (AFN)” is generally defined as
follows:
a. Funds that are obtained automatically from routine business

transactions.
b. Funds that a firm must raise externally from non-spontaneous
sources, i.e., by borrowing or by selling new stock to support
operations.
c. The amount of assets required per dollar of sales.
d. The amount of internally generated cash in a given year minus the
amount of cash needed to acquire the new assets needed to support
growth.
e. A forecasting approach in which the forecasted percentage of sales
for each balance sheet account is held constant.
Page 10 Conceptual M/C Chapter 12

(12.3) Capital intensity ratio Answer: e EASY/MEDIUM
31. The capital intensity ratio is generally defined as follows:
a. Sales divided by total assets, i.e., the total assets turnover

ratio.
b. The percentage of liabilities that increase spontaneously as a
percentage of sales.
c. The ratio of sales to current assets.
d. The ratio of current assets to sales.
e. The amount of assets required per dollar of sales, or A0*/S0.

(12.1) Financial planning Answer: e MEDIUM
32. Which of the following is NOT one of the steps taken in the financial
planning process?
a. Forecast the funds that will be generated internally. If internal

funds are insufficient to cover the required new investment, then
identify sources from which the required external capital can be
raised.
b. Monitor operations after implementing the plan to spot any
deviations and then take corrective actions.
c. Determine the amount of capital that will be needed to support the
plan.
d. Develop a set of forecasted financial statements under alternative
versions of the operating plan in order to analyze the effects of
different operating procedures on projected profits and financial
ratios.
e. Consult with key competitors about the optimal set of prices to
charge, i.e., the prices that will maximize profits for our firm and
its competitors.
(12.3) Spontaneous funds Answer: d MEDIUM

33. 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.
(12.3) Additional funds needed Answer: b MEDIUM

34. A company expects sales to increase during the coming year, and it is
using the AFN equation to forecast the additional capital that it must
raise. Which of the following conditions would cause the AFN to
increase?
a. The company previously thought its fixed assets were being operated
at full capacity, but now it learns that it actually has excess
capacity.
b. The company increases its dividend payout ratio.
c. The company begins to pay employees monthly rather than weekly.
d. The company’s profit margin increases.
e. The company decides to stop taking discounts on purchased materials.

(Comp.) Forecasting concepts Answer: b MEDIUM
35. Which of the following statements is CORRECT?
a. Perhaps the most important step when developing forecasted financial

statements is to determine the breakdown of common equity between
common stock and retained earnings.
b. The first, and perhaps the most critical, step in forecasting
financial requirements is to forecast future sales.
c. Forecasted financial statements, as discussed in the text, are used
primarily as a part of the managerial compensation program, where
management’s historical performance is evaluated.
d. The capital intensity ratio gives us an idea of the physical
condition of the firm’s fixed assets.
e. The AFN equation produces more accurate forecasts than the
forecasted financial statement method, especially if fixed assets
are lumpy, economies of scale exist, or if excess capacity exists.
(12.1) Strategic planning Answer: c MEDIUM/HARD

a. Once a firm has defined its purpose, scope, and objectives, it must
develop a strategy or strategies for achieving its goals. The
statement of corporate strategies sets forth detailed plans rather
than broad approaches for achieving a firm's goals.
b. A firm’s corporate purpose states the general philosophy of the
business and provides managers with specific operational objectives.
c. Operating plans provide management with detailed implementation
guidance, consistent with the corporate strategy, to help meet the
corporate objectives. These operating plans can be developed for
any time horizon, but many companies use a 5-year horizon.
d. A firm’s mission statement defines its lines of business and
geographic area of operations.
e. The corporate scope is a condensed version of the entire set of
strategic plans.

(12.3) Additional funds needed Answer: d MEDIUM/HARD
a. Since accounts payable and accrued liabilities must eventually be

paid off, as these accounts increase, AFN as calculated by the AFN
equation must also increase.
b. Suppose a firm is operating its fixed assets at below 100% of
capacity, but it has no excess current assets. Based on the AFN
equation, its AFN will be larger than if it had been operating with
excess capacity in both fixed and current assets.
c. If a firm retains all of its earnings, then it cannot require any
additional funds to support sales growth.
d. Additional funds needed (AFN) are typically raised using a
combination of notes payable, long-term debt, and common stock.
Such funds are non-spontaneous in the sense that they require
explicit financing decisions to obtain them.
e. If a firm has a positive free cash flow, then it must have either a
zero or a negative AFN.

(12.3) Additional funds needed Answer: d MEDIUM/HARD
a. Any forecast of financial requirements involves determining how much

money the firm will need, and this need is determined by adding
together increases in assets and spontaneous liabilities and then
subtracting operating income.
b. The AFN equation for forecasting funds requirements requires only a
forecast of the firm’s balance sheet. Although a forecasted income
statement may help clarify the results, income statement data are
not essential because funds needed relate only to the balance sheet.
c. Dividends are paid with cash taken from the accumulated retained
earnings account, hence dividend policy does not affect the AFN
forecast.
d. A negative AFN indicates that retained earnings and spontaneous
liabilities are far more than sufficient to finance the additional
assets needed.
e. If the ratios of assets to sales and spontaneous liabilities to
sales do not remain constant, then the AFN equation will provide
more accurate forecasts than the forecasted financial statements
method.
(12.3) AFN equation Answer: a MEDIUM/HARD

a. The sustainable growth rate is the maximum achievable growth rate

without the firm having to raise external funds. In other words, it
is the growth rate at which the firm's AFN equals zero.
b. If a firm’s assets are growing at a positive rate, but its retained
earnings are not increasing, then it would be impossible for the
firm’s AFN to be negative.
c. If a firm increases its dividend payout ratio in anticipation of
higher earnings, but sales and earnings actually decrease, then the
firm’s actual AFN must, mathematically, exceed the previously
calculated AFN.
d. Higher sales usually require higher asset levels, and this leads to
what we call AFN. However, the AFN will be zero if the firm chooses
to retain all of its profits, i.e., to have a zero dividend payout
ratio.
e. Dividend policy does not affect the requirement for external funds
based on the AFN equation.

(12.5) Forecasting financial reqs. Answer: c MEDIUM/HARD
a. When we use the AFN equation, we assume that the ratios of assets
and liabilities to sales (A0*/S0 and L0*/S0) vary from year to year in
a stable, predictable manner.
b. When fixed assets are added in large, discrete units as a company
grows, the assumption of constant ratios is more appropriate than if
assets are relatively small and can be added in small increments as
sales grow.
c. Firms whose fixed assets are “lumpy” frequently have excess
capacity, and this should be accounted for in the financial
forecasting process.
d. For a firm that uses lumpy assets, it is impossible to have small
increases in sales without expanding fixed assets.
e. There are economies of scale in the use of many kinds of assets.
When economies occur the ratios are likely to remain constant over
time as the size of the firm increases. The Economic Ordering
Quantity model for establishing inventory levels demonstrates this
relationship.
Problems
(12.5) Excess capacity Answer: a EASY
41. Last year Godinho Corp. had $250 million of sales, and it had $75
million of fixed assets that were being operated at 80% of capacity.
In millions, how large could sales have been if the company had
operated at full capacity?
a. $312.5
b. $328.1
c. $344.5
d. $361.8
e. $379.8
(12.5) Excess capacity Answer: c MEDIUM

42. Last year Wei Guan Inc. had $350 million of sales, and it had $270
million of fixed assets that were used at 65% of capacity. In
millions, by how much could Wei Guan's sales increase before it is
required to increase its fixed assets?
a. $170.09
b. $179.04
c. $188.46
d. $197.88
e. $207.78
Page 16 Problems Chapter 12

(12.5) Excess capacity Answer: e MEDIUM
43. Last year Handorf-Zhu Inc. had $850 million of sales, and it had $425
million of fixed assets that were used at only 60% of capacity. What
is the maximum sales growth rate the company could achieve before it
had to increase its fixed assets?
a. 54.30%
b. 57.16%
c. 60.17%
d. 63.33%
e. 66.67%
(12.5) Finding target FA/S ratio Answer: b MEDIUM

44. Last year Jain Technologies had $250 million of sales and $100 million
of fixed assets, so its FA/Sales ratio was 40%. However, its fixed
assets were used at only 75% of capacity. Now the company is
developing its financial forecast for the coming year. As part of that
process, the company wants to set its target Fixed Assets/Sales ratio
at the level it would have had had it been operating at full capacity.
What target FA/Sales ratio should the company set?
a. 28.5%
b. 30.0%
c. 31.5%
d. 33.1%
e. 34.7%
(12.3) Positive AFN Answer: d MEDIUM/HARD

45. Clayton Industries is planning its operations for next year, and Ronnie
Clayton, the CEO, wants you to forecast the firm's additional funds
needed (AFN). The firm is operating at full capacity. Data for use in
your forecast are shown below. Based on the AFN equation, what is the
AFN for the coming year? Dollars are in millions.
Last year’s sales = S0 $350 Last year’s accounts payable $40

Sales growth rate = g 30% Last year’s notes payable $50
Last year’s total assets = A0* $500 Last year’s accruals $30
Last year’s profit margin = PM 5% Target payout ratio 60%
a. $102.8
b. $108.2
c. $113.9
d. $119.9
e. $125.9
Chapter 12 Problems Page 17

(12.3) Negative AFN Answer: c MEDIUM/HARD
46. Chua Chang & Wu Inc. is planning its operations for next year, and the
CEO wants you to forecast the firm's additional funds needed (AFN).
The firm is operating at full capacity. Data for use in your forecast
are shown below. Based on the AFN equation, what is the AFN for the
coming year?
Last year’s sales = S0 $200,000 Last year's accounts payable $50,000

Sales growth rate = g 40% Last year's notes payable $15,000
Last year’s total assets = A0* $135,000 Last year's accruals $20,000
Last year’s profit margin = PM 20.0% Target payout ratio 25.0%
a. -$14,440
b. -$15,200
c. -$16,000
d. -$16,800
e. -$17,640
(12.3) AFN--changing div. payout Answer: b MEDIUM/HARD

47. Howton & Howton Worldwide (HHW) is planning its operations for the
coming year, and the CEO wants you to forecast the firm's additional
funds needed (AFN). The firm is operating at full capacity. Data for
use in the forecast are shown below. However, the CEO is concerned
about the impact of a change in the payout ratio from the 10% that was
used in the past to 50%, which the firm's investment bankers have
recommended. Based on the AFN equation, by how much would the AFN for
the coming year change if HHW increased the payout from 10% to the new
and higher level? All dollars are in millions.
Last year’s sales = S0 $300.0 Last year’s accounts payable $50.0

Sales growth rate = g 40% Last year’s notes payable $15.0
Last year’s total assets = A0* $500.0 Last year’s accruals $20.0
Last year’s profit margin = PM 20.0% Initial payout ratio 10.0%
a. $31.9
b. $33.6
c. $35.3
d. $37.0
e. $38.9
Page 18 Problems Chapter 12

(12.5) Finding target FA/S ratio Answer: b HARD
48. Last year Emery Industries had $450 million of sales and $225 million
of fixed assets, so its FA/Sales ratio was 50%. However, its fixed
assets were used at only 65% of capacity. If the company had been able
to sell off enough of its fixed assets at book value so that it was
operating at full capacity, with sales held constant at $450 million,
how much cash (in millions) would it have generated?
a. $74.81
b. $78.75
c. $82.69
d. $86.82
e. $91.16
Chapter 12 Problems Page 19

CHAPTER 12
ANSWERS AND SOLUTIONS
1. (12.1) Mission statement Answer: a EASY
2. (12.1) Corporate strategies Answer: b EASY
3. (12.2) Sales forecast Answer: a EASY
4. (12.2) Sales forecast Answer: a EASY
5. (12.2) Sales forecast Answer: b EASY
6. (12.3) Spontaneous liabilities Answer: a EASY
7. (12.3) Spontaneous liabilities Answer: b EASY
8. (12.3) Spontaneous liabilities Answer: a EASY
9. (12.3) Addition to ret. earnings Answer: a EASY
10. (12.3) Asset increase Answer: a EASY
11. (12.3) Additional funds needed Answer: a EASY
12. (12.3) Additional funds needed Answer: b EASY
13. (12.3) Additional funds needed Answer: b EASY
14. (12.3) Capital intensity ratio Answer: a EASY
15. (12.4) Forecasted statements Answer: a EASY
16. (12.1) Operating plans Answer: b MEDIUM
17. (12.1) Financial plans Answer: a MEDIUM
18. (12.3) Additional funds needed Answer: a MEDIUM
19. (12.3) Additional funds needed Answer: b MEDIUM
20. (12.3) Capital intensity ratio Answer: b MEDIUM
21. (12.3) Capital intensity ratio Answer: a MEDIUM
22. (12.3) Capital intensity ratio Answer: a MEDIUM
23. (12.3) Capital intensity ratio Answer: b MEDIUM
24. (12.3) Sustainable growth rate Answer: b MEDIUM
Page 20 Answers Chapter 12

25. (12.4) Financial forecasting Answer: b MEDIUM
26. (12.5) Forecasting when ratios chg. Answer: a MEDIUM
27. (12.1) Strategic planning Answer: c EASY
28. (12.3) AFN equation Answer: b EASY
29. (12.3) Additional funds needed Answer: a EASY/MEDIUM
Answer a is obviously correct. A switch to a just-in-time inventory system and outsourcing

production would lower the firm’s capital intensity ratio which would lower AFN. Note that with
purchase terms of 1/5 net 90, the nominal cost of non-free trade credit is only 4.34%, whereas with
3/15, net 35, the nominal cost of trade credit is over 56%. Therefore, the firm should have been taking
discounts originally, hence should have had few accounts payable, whereas it would probably not take
discounts and thus have more accounts payable with the new supplier. That change would lower its
AFN.
30. (12.3) Additional funds needed Answer: b EASY/MEDIUM
31. (12.3) Capital intensity ratio Answer: e EASY/MEDIUM
32. (12.1) Financial planning Answer: e MEDIUM
33. (12.3) Spontaneous funds Answer: d MEDIUM
34. (12.3) Additional funds needed Answer: b MEDIUM
35. (Comp.) Forecasting concepts Answer: b MEDIUM
36. (12.1) Strategic planning Answer: c MEDIUM/HARD
37. (12.3) Additional funds needed Answer: d MEDIUM/HARD
38. (12.3) Additional funds needed Answer: d MEDIUM/HARD
39. (12.3) AFN equation Answer: a MEDIUM/HARD
40. (12.5) Forecasting financial reqs. Answer: c MEDIUM/HARD
41. (12.5) Excess capacity Answer: a EASY
Sales $250
Fixed assets $75.0
% of capacity utilized 80.0%
Full capacity sales = Actual sales/% of capacity used = $312.5
Chapter 12 Answers Page 21

42. (12.5) Excess capacity Answer: c MEDIUM
Sales $350
Fixed assets (not used in calculations) $270
% of capacity utilized 65%
Sales at full capacity = Actual sales/% of capacity used = $538.46
Additional sales without adding FA = Full capacity sales − Actual sales = $188.46
43. (12.5) Excess capacity Answer: e MEDIUM
Sales $850
Fixed assets (not used in calculations) $425
Sales at full capacity = Actual sales/% of capacity used = $1,416.67
Additional sales without adding FA = Full capacity sales − Actual sales = $566.67
Percent growth in sales = Additional sales/Old sales = 66.67%
44. (12.5) Finding target FA/S ratio Answer: b MEDIUM
Sales $250
Fixed assets $100
Target FA/Sales ratio = Full capacity FA/Sales = FA Capacity sales = 30.0%
45. (12.3) Positive AFN Answer: d MEDIUM/HARD
Last year's sales = S0 $350

Sales growth rate = g 30%
Forecasted sales = S0 × (1 + g) $455
ΔS = change in sales = S1 − S0 = S0 × g $105
Last year's total assets = A0* = A0* since full capacity $500
Last year's accounts payable $40
Last year's notes payable. Not spontaneous, so does not enter AFN calculation $50
Last year's accruals $30
L0* = payables + accruals $70
Profit margin = M 5.0%
Target payout ratio 60.0%
AFN = (A0*/S0)ΔS – (L0*/S0)ΔS – Profit margin × S1 × (1 − Payout)

AFN = $150.0 – $21.0 – $9.1 = $119.9
Page 22 Answers Chapter 12

46. (12.3) Negative AFN Answer: c MEDIUM/HARD
Last year's sales = S0 $200,000

Forecasted sales = S0 × (1 + g) $280,000
ΔS = change in sales = S1 − S0 = S0 × g $80,000
Last year's total assets = A0* = A0* since full capacity $135,000
Last year's accounts payable $50,000
Last year's notes payable. Not spontaneous, so does not enter AFN calculation $15,000
Last year's accruals $20,000
L0* = payables + accruals $70,000
Profit margin = M 20.0%
Target payout ratio 25.0%

AFN = $54,000 – $28,000 – $42,000 = -$16,000
47. (12.3) AFN--changing div. payout Answer: b MEDIUM/HARD
Last year's sales = S0 $300

Forecasted sales = S0 × (1 + g) $420
ΔS = change in sales = S1 − S0 = S0 × g $120
Last year's total assets = A0* = A0* since full capacity $500
Last year's accounts payable $50
Last year's notes payable. Not spontaneous, so does not enter AFN calculation $15
Last year's accruals $20
L0* = payables + accruals $70
Profit margin = M 20%
Initial payout ratio 10%
New payout ratio 50%

Old AFN = $200.0 – $28.0 – $75.6 = $96.4
New AFN = $200.0 – $28.0 – $42.0 = $130.0
Change in AFN = $33.6
48. (12.5) Finding target FA/S ratio Answer: b HARD
Sales $450
Fixed assets $225
Target FA/Sales ratio = Full capacity FA/Sales = FA/Capacity sales = 32.50%
Optimal FA = Sales × Target FA/Sales ratio = $146.25
Cash generated = Actual FA − Optimal FA = $78.75
Chapter 12 Answers Page 23

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pure white; sides of the rump like the back; lower tail-coverts
brownish-red, with faint whitish dots.
Length to end of tail 7 3/4 inches, to end of claws 9 3/4, to end of
wings 7; extent of wings 12 1/4; wing from flexure 3 9/12; tail 1 4/12;
tarsus 11/12; first toe and claw 5/12; second toe 10/12, its claw 3/12;
third toe 1 1/12, its claw 3 1/2/12; fourth toe 10 1/2/12, its claw 2 1/2/12.
Weight 2 3/4 oz.
The Female is smaller than the male, but similar in colour.
Length to end of tail 6 3/4 inches, to end of claws 8 3/4; extent of

wings 11. Weight 2 oz.
AMERICAN RING PLOVER.
Charadrius semipalmatus, Bonap.

PLATE CCCXXX. Male and Young.
I have had great pleasure in observing the migrations of this species,

particularly in early spring, when great numbers enter the southern
portions of the United States, on their way northward, where it is now
well known to breed. At that period, whatever attempts you may
make to prevent their progress, they always endeavour to advance
eastward; whereas in early autumn, they will rove in any direction, as
if perfectly aware that, the task imposed upon them by Nature having
been accomplished, they may enjoy their leisure. Those which pass
the winter within the limits of the Union, are mostly found along the
shores of South Carolina, Georgia, the Floridas, and as far south as
the mouths of the Mississippi; there being no doubt that many
remain on the coasts of the Gulf of Mexico, as I have found some
there early in spring, before observing those which I knew by their
manners to be recently arrived. In the course of my late visit to
Texas, I found them on Galveston Bay, where I observed some
arriving from the westward.
During their polar migration, they proceed rather swiftly, for although
they appear to touch at every place likely to afford them food and
repose, they seldom tarry long. Thus, many individuals, which may
have been in Texas early in April, not unfrequently reach Labrador by
the middle of May; although some are a month later in reaching the
ultimate point of their journey, which, according to Dr Richardson,
sometimes extends as far as the Arctic Regions.
While with us in spring, they confine themselves to the sandy
beaches of our sea-coasts, whether on the mainland or on islands;
but when they arrive at their breeding stations, they abandon their
maritime life, and resort to mountainous mossy lands, as is also the
custom with several other species. On my way to Labrador, I saw
some of them in almost every place at which we landed; and when I
reached Nastasguan Bay, they were breeding in all the spots that
were adapted for that purpose. Their manners formed an agreeable
subject of observation to all the members of my party. As soon as
one of us was noticed by a Ring Plover, it would at once stand still
and become silent. If we did the same, it continued, and seldom
failed to wear out our patience. If we advanced, it would lower itself
and squat on the moss or bare rock until approached, when it would
suddenly rise on its feet, droop its wings, depress its head, and run
with great speed to a considerable distance, uttering all the while a
low rolling and querulous cry, very pleasing to the ear. On being
surprised when in charge of their young, they would open their wings
to the full extent, and beat the ground with their extremities, as if
unable to rise. If pursued, they allowed us to come within a few feet,
then took flight, and attempted to decoy us away from their young,
which lay so close that we very seldom discovered them, but which,
on being traced, ran swiftly off, uttering a plaintive peep often
repeated, that never failed to bring their parents to their aid. At
Labrador, the Ring Plover begins to breed in the beginning of June.
On the 2d of July, I procured several young birds apparently about a
week old; they ran briskly to avoid us, and concealed themselves so
closely by squatting, that it was very difficult to discover them even
when only a few feet distant.
This species, like the Piping Plover, Charadrius melodus, forms no
nest; and whilst the latter scoops a place in the sand for its eggs, the
Ring Plover forms a similar cavity in the moss, in a place sheltered
from the north winds, and exposed to the full rays of the sun, usually
near the margins of small ponds formed by the melting of the snow,
and surrounded by short grass. Some of these pools are found on
the tops of the highest rocks of that country. The eggs, like those of
all the family, are four, and placed with the small ends together. They
are broad at the larger end, rather sharp at the other, measure 1 1/4
inch in length, 7 1/8 inches in their greatest breadth, are of a dull
yellowish colour, irregularly blotched and spotted all over with dark
brown of different tints. The young are at first of a yellowish-grey
colour, prettily marked with darker spots on the shoulders and rump.
As soon as their parents dismissed them, they were observed
searching for food among the drying cod-fish, and along the
beaches.
By the 12th of August, all the individuals which had bred in Labrador
and Newfoundland, had taken their departure, migrating southward
in company with the Phalaropes and Schintz’s Sandpipers. Many of
these birds proceed by our great lakes and rivers, they being
sometimes seen in September along the shores of the Ohio and
Mississippi. At this period they are now and then observed on
ploughed lands, where they appear to procure different species of
seeds and insects. Along the whole extent of our Atlantic shores,
they are numerous at this season, and great numbers are killed, the
flesh of the young birds especially being juicy and tender.
The flight of this species is swift and sustained. They are fond of
associating with other birds of similar habits, and are generally
unsuspicious, so that they are easily approached. When on wing,
their notes are sharp, sonorous, and frequently repeated. The young
members of my party were often much amused by witnessing our
pointer chasing the old birds, whilst the latter, as if perfectly aware of
the superiority in speed, would seem to coax him on, and never
failed to exhaust him by flying along the declivities of the rocks up to
their summits, and afterwards plunging downwards to the base, thus
forming great circuits over a limited range. Their food consists of
small crustacea, mollusca, and the eggs of various marine animals.
The old males are very pugnacious in the breeding season, and
engage in obstinate conflicts, drooping their wings, and trailing their
tail fully spread out in the manner of some species of Grouse on
similar occasions.
Ring Plover, Tringa Hiaticula, Wils. Amer. Ornith. vol. vii. p. 65, pl. 59, fig
3.
Charadrius semipalmatus, Ch. Bonaparte, Synopsis of Birds of United
States, p. 296.
American Ring Plover, Charadrius semipalmatus, Richards. and Swains.
Fauna. Bor.-Amer. vol. ii. p. 367.
Semipalmated Ring Plover, Nuttall, Manual, vol. ii. p. 24.
Adult Male. Plate CCCXXX. Fig. 1.

Bill shorter than the head, straight, somewhat cylindrical. Upper
mandible with the dorsal line straight for half its length, then bulging
a little and curving to the tip, which is rather acute, the sides sloping
at the base, convex towards the end, where the edges are sharp and
direct. Nasal groove extended along more than half of the mandible;
nostrils basal, linear, in the lower part of the membrane, open, and
pervious. Lower mandible with the angle short, narrow, but rounded,
the sides at the base sloping outwards and flat, the dorsal line
ascending and slightly convex, the edges sharp and involute towards
the tip.
Head of moderate size, oblong, rather compressed, the forehead
rounded. Eyes large. Neck rather short. Body ovate, compact. Wings
long. Feet slender, of moderate length; tibia bare a considerable way
above the joint; tarsus of moderate length, rather compressed,
covered all round with sub-hexagonal scales; toes slender; the hind
toe wanting; third or middle toe much longer than the outer, which
exceeds the inner; all with numerous scutella; the outer connected
with the middle toe by a web which extends to the second joint of the
former, and runs along the edge of the latter, forming a broad
margin, the outer toe also connected with the middle toe by a short
membrane which does not extend more than half-way to the second
joint. Claws small, slightly arched, compressed, rather blunt, that of
the middle toe having the inner edge dilated.
Plumage soft and blended; the feathers rounded, those of the back
somewhat distinct. Wings long and pointed; primary quills tapering,
the first longest, the second a little shorter, the rest rapidly
graduated; outer secondaries incurved and obliquely emarginate; the
inner tapering and elongated, one of them reaching to half an inch
from the tip of the longest primary. Tail of moderate length,
considerably rounded, of twelve feathers.
Bill black, its basal half rich orange. Iris deep hazel. Feet pale flesh-
colour, claws black. Forehead, loral space, and a band passing
below the eye and including the auriculars, black; the rest of the
head above and the nape, light greyish-brown, tinged with dull olive.
A broad band between the eyes, continuous with a streak over them,
a small band on the lower eyelid, and a ring on the middle of the
neck, enlarged in front so as to cover the throat, pure white. A broad
ring of black on the lower part of the neck, broader in front. All the
lower parts and the sides of the rump white. The upper parts of the
same greyish-brown as the head, the scapulars and elongated inner
secondaries more decidedly glossed with olive. Alula, primary
coverts, and primary quills dusky, the coverts tipped with white, the
outer primaries, with a portion of the shaft white, the inner with an
elongated patch of white on the outer web in addition, and the
proximal part of the inner web of the same colour. Secondary quills
with a narrow terminal margin of white, which is much enlarged on
(or in some specimens covers) the two next to the elongated ones,
which are externally margined with brownish-white. Tail pale greyish-
brown, brownish black towards the end, the tip white, enlarging on
the outer, and including the whole of the lateral feather, and the outer
web of the next.
Length to end of tail 7 1/4 inches, to end of wings 8, to end of claws
7; extent of wings 14; bill along the ridge 1/2, along the edge of lower
mandible 7/12; wing from flexure 5, tail 2 1/2; tarsus 11/12, middle toe
and claw 10/12. Weight 1 1/2 oz.
The Female is a little larger than the male, but similar, although the
black markings are tinged with brown.
Young in September. Plate CCCXXX. Fig. 2.
Bill dusky, at the base yellowish. Feet pale yellowish-green, claws
dusky. Upper parts lighter than in the adult, the feathers margined
with pale yellowish-grey; no black band on the forehead, or on the
neck, but a patch of dusky on the side of the neck and breast; the
band from the bill to behind the eye greyish-brown.
This species exhibits a very intimate affinity to Charadrius Hiaticula
of Europe, which is precisely similar in form, proportions, and
colouring, but considerably larger, and having the feet orange-
coloured, with the webs much less extended.
GOOSANDER.
Mergus merganser, Linn.

PLATE CCCXXXI. Male and Female.
This species may be said to be a constant resident with us, as many

individuals breed in the interior of the States of New York,
Massachusetts, and Maine. When I first resided in Kentucky, some
bred there also, although at the present day none pass the summer
in that country. In the latter part of autumn, in winter, and in early
spring, they are found in all parts of the Union; in Texas I procured
some in April 1837, and in the beginning of May saw a considerable
flock in Galveston Bay. How much farther southward their migrations
extend I know not, but from having observed them coming from that
direction, I suspect that they advance pretty far into the interior of
Mexico, from which some perhaps cross to the Arkansas River, on
which I have also seen them. On the Mississippi, the Ohio, and their
tributaries, Goosanders are found during the coldest weather; and
when the larger streams are covered with ice, they betake
themselves to such smaller creeks as have very rapid currents or
cascades, about which they feed. But there are parts of our southern
coast, where they are exceedingly rare, such as South Carolina,
where my friend Dr Bachman has never seen one, and the Floridas,
in which none occurred to me during my rambles there. Indeed one
is surprised to find that among birds like this, which is so hardy as to
remain in our North-eastern States during the severest part of the
winter, some should extend their movements at the same season as
far to the south-west as Texas; but facts like these are beyond our
philosophy. In the lower parts of Louisiana, this species is called the
“Bee-scie-de-mer,” probably because there it is found only on the
large salt-water lakes, and about the mouths of the Mississippi, and
to distinguish it from the Hooded Merganser, which there is more
usually seen on fresh water. I have been assured by Professor
MacCulloch of Pictou that it now and then breeds in Nova Scotia.
Yet I found none in Labrador or Newfoundland, where the Red-
breasted species was breeding in great numbers. Dr Richardson
found it in abundance in the Fur Countries.
The Goosander is a vigorous and robust bird. It swims deeply, but
with considerable speed, even against a strong current, running
waters being generally preferred by it, even when rather shallow,
provided their beds are of sand or pebbles, for it is rarely seen on
muddy or stagnant waters, even during the breeding season, when it
returns to the inland lakes. Like the Grebes it has the power of
sinking backwards, and it dives expertly, remaining occasionally
several minutes beneath the surface. It usually swims and dives
against the current, and close by the shores, extricating itself from
floating ice by passing under it. Its voracity is great, so that it
consumes an extraordinary quantity of fish. I have found fishes in its
stomach seven inches in length, and of smaller kinds so many as to
weigh more than half a pound. Digestion takes place with great
rapidity, insomuch that some which I have fed in captivity devoured
more than two dozen of fishes about four inches in length, four times
daily, and yet always seemed to be desirous of more. The alleged
awkwardness of this bird when on shore is a fable, for I have seen
individuals while courting in spring run with great celerity fifty or more
yards at a time, keeping nearly in an erect position. On occasions of
this kind I have observed on the sand-bars of the Mississippi flocks
of seven or eight males chasing each other with great animosity. At
other times, however, they are not fond of walking much, but when
on shore are generally seen lying flat on the ground. At times the
Mergansers rise almost at once on wing from the water, but at others
they seem to find considerable difficulty, patting it with their feet for
many yards. These differences seem to depend on various
circumstances, such as their being suddenly surprised, or during
violent winds. They generally, if not always, rise on wing against the
breeze.
The flight of the Goosander is powerful, and as rapid and sustained
as that of the Red-breasted and Hooded Mergansers. When fairly
under way and at a good height, they advance in an almost direct
course and proceed with surprising velocity, so that, when suddenly
apprised of the vicinity of man, they at times find it difficult to check
their speed so quickly as may be necessary for their safety. I well
remember that on several occasions having watched one of these
birds flying directly up a creek and towards me, I have taken aim at it
and fired when it was at the proper distance, and yet such had been
its velocity that it would advance, after being shot, many yards
towards me. When rising from the water, whatever number may be in
the flock, they all start together, paddle off with their feet and wings,
stretching out their necks, and thus run as it were on the water to the
distance of twenty or thirty yards with great velocity, extending in a
front, or following each other in a line, according to the extent of the
space before them. They then gradually ascend to the height of the
trees, and move off to some considerable distance, but often return
to the same place. They seem to ascertain the fertility of the water by
sipping a little on their alighting, and then, having found appearances
favourable, they open their bills, apparently to take a deep
inspiration, and immediately dive. When they have procured a
sufficiency of food, they betake themselves to some sand-bar, on
which they repose until it is digested.
The Goosander rises to the surface with the fish in its bill, and,
shifting it about until it is in a proper position, swallows it head
foremost, then dives for more. So deeply does it swim, that on such
occasions not more than a third of its body is seen on the surface;
and there is very little chance of shooting it, for it dives on seeing the
flash, or even on hearing the click of the lock. The only chance of
procuring one at such times is when, on coming to the surface, it
stretches itself up and beats its wings. If it is only wounded, it often
exhibits great tenacity of life, and diving at once remains a long time
in the water. On emerging, it is seen shaking its head violently, for
the purpose of disgorging its food, and, perhaps, the blood that has
flowed into its lungs; and, on effecting this, it again plunges
headlong. At length, you see it come to the surface, with its
beautifully tinged breast upwards; but if your object be to obtain
game, you will have little satisfaction in procuring a Goosander or
any of its genus, for they are all fishy, oily, tough, and fitted for the
palate of none but experienced epicures. The food of the Goosander
consists chiefly of fish, but also of bivalve shells, snails, leeches,
aquatic lizards, crays, and frogs.
Now, good Reader, Spring has once more gladdened the face of
Nature, pearly drops hang on every leaf, glistening in the bright
sunshine, and thousands of gay insects flutter around. My light
canoe is ready. Leap in, seat yourself snugly in the bow, and sit still
while I paddle you to the green islands of this beautiful lake, where
we shall probably find a Merganser or two, perhaps a female sitting
on her eggs. As to the dog, we need him not; so lie thee down,
Baron, until I return. I was always fond of “paddling my own canoe,”
and I never met with a single accident so long as I managed it
myself; but on more occasions than one I have been turned out as
gently as one turns himself in bed, and having put the frail bark to
rights, have assisted the awkward fellow who had caused the
disaster, dived for his gun and my own, and conducted him to the
camp to dry his garments. Therefore, be quiet, and fear nothing.
See! what’s that? Nothing, friend, but the head of a musk-rat. But
look there, how swiftly swims that beautiful Loon! Heed him not;
have I not already told you all that I know about him? How smooth
and silvery are the pure waters, how beautiful those tall trees! The
dogwood is in full bloom, so are the maples, whose rich red
blossoms cluster on the twigs. Here we are just entering the rushes
of this little island. Get out, and wade to the shore with all possible
gentleness; or allow me to do so; for to lighten our slight bark, one of
us must get into the water. Softly we advance as I pull the canoe by
the bow; but now, squat, for here are tracks of the Goosander. There
now lies the female close before us. She thinks we have not seen
her, for she crouches closer upon her eggs. Alarm her not, or she will
soon depart. There she croaks, and scrambling off through the tall
grass, flies off on rapid wings. Look at the nest! count the eggs if you
choose, but allow me, if you please, to describe them.
The islands on which the Goosander is wont to breed are mostly
small, as if selected for the purpose of allowing the sitting bird to get
soon to the water in case of danger. The nest is very large, at times
raised seven or eight inches on the top of a bed of all the dead
weeds which the bird can gather in the neighbourhood. Properly
speaking, the real nest, however, is not larger than that of the Dusky
Duck, and is rather neatly formed externally of fibrous roots, and
lined round the edges with the down of the bird. The interior is about
seven and a half inches in diameter, and four inches in depth. There
are seldom more than seven or eight eggs, which measure two
inches and seven-eighths in length, by two inches in breadth, are of
an elliptical form, being nearly equally rounded at both ends, smooth,
and of a uniform dull cream-colour. The young are led to the water in
a few hours after they are hatched, and are covered with fur-like hair,
of a reddish-brown colour about the head and neck, the body lightish
grey. They are excellent divers, and run on the surface with
surprising velocity; but they are not able to fly for nearly two months,
when, being fat, they are easily fatigued if closely pursued, and on
such occasions will often betake themselves to the shore, lie down,
and even allow you to lay hold of them. My friend Thomas Nuttall
has given an interesting account of his chase of a brood of
Goosanders.
“Early in the month of May 1832, while descending the
Susquehannah near to Dunstown, a few miles below the gorge of
the Alleghanies, through which that river meanders near the foot of
the Bald Eagle Mountain, G. Lyman, Esq. and myself observed, near
the head of a little bushy island, some Wild Duck, as we thought,
with her brood making off round a point which closed the view. On
rowing to the spot, the wily parent had still continued her retreat, and
we gave chase to the party, which with all the exertions that could be
made in rowing, still kept at a respectful distance before us. We now
perceived that these diminutive possessors of their natal island were
a female Goosander or Dun Diver, with a small but active little brood
of eight young ones. On pushing the chase for near half an hour, the
young, becoming somewhat fatigued, drew around their natural
protector, who now and then bore them along crowding on her back.
At length, stealing nearly from our sight, as the chase relaxed, the
mother landed at a distance on the gravelly shore, which being
nearly of her own grey colour and that of her family, served for some
time, as a complete concealment. When approached again,
however, they took to the water, and after a second attempt, in which
the young strove to escape by repeated divings, we succeeded in
cutting off the retreat of one of the family, which was at length taken
from behind a flat boat under which it had finally retreated to hide.
We now examined the little stranger, and found it to be a young
Merganser of this species, not bigger than the egg of a Goose, and
yet already a most elegant epitome of its female parent, generally
grey, with the rufous head and neck, and the rudiments of a growing
crest. After suffering itself to be examined with great calmness, and
without any apparent fear, we restored it to its more natural element,
and, at the first effort, this little diminutive of its species flew under
the water like an arrow, and coming out to the surface only at
considerable distances, we soon lost sight of it, making good its
aquatic retreat in quest of the parent. On inquiry, we learned from the
tavern-keeper, that for several years past a nest or brood of these
birds had annually been seen near this solitary and secluded island.”
The male Goosanders leave the females immediately after
incubation has commenced, and are then seen in the wildest parts of
the country. Several females are often found breeding on the same
island, and it is after their young are pretty well grown, that they
moult. For a number of years past, I have sometimes entertained a
hope, at the approach of the breeding season, of finding a male
Goosander having his head adorned with a broad erectile crest, like
that of the female and young, but I have hitherto been disappointed,
and am therefore unable to say whether such a crest ever exists in
that sex. The young of both sexes retain the colouring of the female
for two years, during which time the males can be distinguished from
the females only by their being much larger. The males have not the
rich buffy tint on the breast until about two years after they have
commenced breeding, and the first perceptible change by which their
sex is distinguished is the appearance of black feathers on the head
and neck. Until of late years, the females were thought to be of a
distinct species, to which the name of Dun Diver was given.
Many writers have said that this bird breeds in the hollows of trees,
or on their branches; but of the various nests which I have found, not
one occurred in such situations; and the Hooded Merganser is the
only species of this genus which I have observed nestling in an
elevated place.
The notes of the Goosander are harsh, consisting of hoarse croaks,
seldom uttered unless the bird be suddenly startled, or when
courting. The females are usually silent, but when with their young
brood, and pursued, they emit the same guttural sounds as the
males. Goosanders are easily caught with hooks baited with fish; my
friend John Bachman has procured them in this manner on the
Hudson River, and I also have on the Ohio.
Along with the representation of a pair of adult birds of this species, I
have given a correct view of the Cohoes Falls in the State of New
York.
Mergus Merganser, Linn. Syst. Nat. vol. i. 208.—Lath. Ind. Ornith. vol. ii. p.
828.—Ch. Bonaparte, Synopsis of Birds of United States, p. 397.
Goosander, Mergus Merganser, Wils. Amer. Ornith. vol. viii. p.68, pl. 68,
fig. 1. Male, and fig. 2. Female.—Richards. and Swains. Fauna Bor.-Amer.
vol. ii. p. 461.—Nuttall, Manual, vol. ii. p. 460.
Adult Male. Plate CCCXXXI. Fig. 1.

Bill about the length of the head, straight, strong, tapering, higher
than broad at the base, nearly cylindrical toward the end. Upper
mandible with the dorsal outline sloping gently to the middle, then
straight, along the unguis suddenly decurved; the ridge broad at the
base, then convex; the sides sloping rapidly at the base, convex
toward the end; the edges serrated beneath; the unguis oblong,
much curved, abruptly rounded at the end. Nasal groove elongated;
nostrils submedial, linear, direct, pervious. Lower mandible with the
angle very narrow, and extended to the unguis, which is obovate; the
sides nearly erect in their outer half, with a long narrow groove, the
edges serrate within.
Head rather large, compressed, oblong. Neck rather short, thick.
Body full, depressed. Feet placed far behind, short, stout; tibia bare
for about a quarter of an inch; tarsus very short, compressed,
anteriorly covered with small scutella, and another row on the lower
half externally, the sides reticulate. Hind toe very small, with an
inferior free membrane; anterior toes half as long again as the
tarsus; second shorter than fourth, which is almost as long as the
third, all connected by reticulated webs, which are deeply concave;
the outer toe slightly margined, the inner with a broad marginal
membrane. Claws rather small, moderately arched, compressed,
acute, that of the middle toe with a thin inner edge.
Plumage moderately full, dense, soft, glossy. Feathers of the head
and neck silky, blended, elongated along the median line, so as to
form a not conspicuous crest; of the back rather compact; of the
lower parts blended. Wings short, of moderate breadth, convex,
acute; primaries narrow, tapering, the first scarcely shorter than the
second, the rest rapidly graduated; secondaries rather short, narrow,
rounded, the inner elongated and tapering. Tail short, much rounded,
of eighteen rather narrow rounded feathers.
Bill bright vermilion, with the unguis black. Iris carmine. Feet orange-
red in winter, bright vermilion in the breeding season. Head and
upper half of neck greenish-black, splendent, with bright green
reflections; hind part of neck below white; fore part of neck and all
the under parts of a delicate reddish-buff; the sides of the rump and
part of the abdomen greyish-white, finely undulated and dotted with
dark grey; some of the lower wing-coverts dusky, the larger coverts
and primaries light grey. The fore part of the back, and the inner
scapulars, glossy black; the hind part ash-grey, becoming lighter and
finally undulated on the rump. Upper tail-coverts and tail-feathers
deep grey, outer scapulars white; a transverse band of black at the
base of the wing, concealed by the scapulars. Wing-coverts white;
alula, primary coverts, primary quills, and a band formed by the base
of the first row of large coverts, black; secondaries white, six of them
margined externally with a black line, the innermost margined on
both webs, but more broadly on the inner, and with the tip black.
Length to end of tail 27 inches, to end of claws 26 1/2, to end of
wings 24, to carpal joint 13 5/8, to end of green on the neck 7 1/4;
extent of wings 36; bill along the ridge 2 8/12, along the edge of lower
mandible 3 1/12; wing from flexure 11 1/4; tail 5; tarsus 1 10 1/2/12; first
1/2 1/2
toe and claw 10/12; outer toe 2 7 /12, its claw 4 /12; middle toe
2 8/12, its claw 5/12. Weight 5 lb. Of another 3 3/4 lb.
Dimensions of two other Males:

Length to end of tail, 26 25 7/8 inches.
................................claws, 27 25
................................wings, 24 23 1/2
Extent of wings, 38 35
Female. Plate CCCXXXI.

The female is much smaller. The bill, eyes, and feet are coloured as
in the male, but the ridge of the bill is black, and the nail whitish; the
longitudinal crest is much more elongated, being composed of linear
feathers, some of them fully two inches and a half long. Head and
upper part of neck brownish-red; throat white; all the upper parts,
with the sides of the body and rump deep ash-grey, the feathers
paler at the margin. Smaller wing-coverts and inner secondaries
grey; bases and tips of secondary coverts black, the intermediate
part white; middle secondaries white, outer and primaries black;
anterior part of neck below faintly banded with ash-grey; breast and
abdomen white, slightly tinged with buff.
Length to end of tail 24 inches, to end of claws 23 1/2, to end of
wings 20 3/4; extent of wings 34; bill along the ridge 1 11/12, along the
edge of lower mandible 2 1/2; wing from flexure 10 1/4; tail 4 1/2;
tarsus 1 9/12; hind toe and claw 8 1/2/12; middle toe 2 4/12, its claw 5/12;
outer toe 2 4/12, its claw 4/12.
The young males after the autumnal moult, and until the middle of
summer, resemble the females.
An adult male obtained near Boston examined. The heart is 2 inches
long; the lobes of the liver are nearly equal, the right being 3 inches
7 twelfths long, the left 3 inches 3 twelfths.
The upper mandible has about 28 recurved conical, acute, horny
papillæ, and an internal series of smaller, on each side; the tip of the
unguis serrulate; on the lower mandible are about 40 of the same
nature. The tongue is 2 inches 1 twelfth long, fleshy, emarginate, and
papillate at the base, tapering, with a double row of slender reversed
papillæ along the upper surface, and two lateral series of filaments
on each side; the tip lacerated, horny on the back. Posterior nasal
aperture oblong, 10 twelfths in length, papillate on the edges.
Aperture of the glottis 4 1/2 twelfths long. The mouth is 10 twelfths in
breadth, but may be extended to 1 inch 9 twelfths. The œsophagus
is 10 1/2 inches long, its diameter 1 inch 7 twelfths on the neck,
contracting to 8 twelfths as it enters the thorax, but again expanding;
the external coat of transverse muscular fibres very thick; the internal
layer of longitudinal fibres very distinct; the mucous coat thrown into
prominent longitudinal plaits when contracted; the mucous follicles
disposed in longitudinal single series. The proventriculus is 2 inches
long, the glandules very numerous, oblong, about 2 twelfths in
length, forming a complete belt. The stomach is a strong gizzard, of
moderate size, 2 inches long, the lateral muscles 5 twelfths thick; the
epithelium very thick, nearly 1 twelfth, longitudinally rugous. In the
stomach and gullet was a fish 9 inches long, the portions lying in the
stomach and proventriculus partially dissolved, the rest 4 inches
long, not acted upon; there were also two fragments of quartz, one of
them a quarter of an inch long. The intestine is long, measuring 6
feet 3 inches, its diameter from 5 to 3 twelfths. The cœca are 2
inches long, for half an inch 1 1/2 twelfth in diameter, in the rest of
their extent 4 twelfths. The rectum 5 inches long, including the
cloaca, which has a diameter of an inch and a quarter.
The trachea, 10 1/2 inches long, has at first a diameter of 4 twelfths,
dilates gradually to 8 twelfths, then contracts to 4 twelfths, enlarges a
second time to 7 twelfths, and gradually contracts to 3 twelfths. In
this space the rings, 146, are strong, broad, and osseous. At its
lower part is an enormous dilatation composed of numerous united
rings, bulging irregularly on the right side and behind, and on the left
expanded into a case having two large spaces filled by membrane;
the greatest diameter of this tympanum is 2 inches and 2 twelfths.
The bronchi come off at the distance of nearly an inch from each
other, and are short, but wide, with about 25 half-rings. The lateral or
contractor muscles are very strong, give off a pair of cleido-tracheals
from the second enlargement, and at the commencement of the
labyrinth the sterno-tracheals, which are also very large; but there
are no other inferior laryngeal muscles.
The intestine of a male in the first winter is 6 feet 8 inches long, its
greatest diameter half an inch, wider towards the rectum than at the
upper part, where the diameter is 4 twelfths. Rectum 4 1/2 inches
long, exclusive of the cloaca. Cœca 2 1/4 inches. Contents of
stomach, remains of fishes and a great quantity of quartz fragments.
An adult Female. Œsophagus 10 1/2 inches long; stomach 2 inches

long; intestine 5 feet 3 inches; rectum 4 1/2; cœca 2 2/12. The trachea
9 inches long, of uniform diameter, 4 twelfths, with a very slight
dilatation toward the lower part, and at the lower larynx contracted to
3 twelfths; the last ring is very large, laterally dilated, but
symmetrical; the bronchi come off at the distance of 5 twelfths from
each other, and are composed of 25 rings. The tracheal rings 150.
With respect to their digestive organs, the Mergansers are perhaps
more allied to the Divers than to the Ducks. In this, as in other
respects, they seem to be placed on the limits of the two families.

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Financial Management Theory and

Practice An asia 1st Edition Brigham

(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)

(12.1) Corporate strategies Answer: b EASY

(12.2) Sales forecast Answer: a EASY

(12.2) Sales forecast Answer: a EASY

Page 2 True/False Chapter 12

(12.3) Spontaneous liabilities Answer: b EASY

(12.3) Spontaneous liabilities Answer: a EASY

(12.3) Addition to ret. earnings Answer: a EASY

(12.3) Asset increase Answer: a EASY

Page 4 True/False Chapter 12

(12.3) Additional funds needed Answer: b EASY

(12.3) Capital intensity ratio Answer: a EASY

(12.4) Forecasted statements Answer: a EASY

(12.1) Operating plans Answer: b MEDIUM

Page 6 True/False Chapter 12

(12.3) Additional funds needed Answer: b MEDIUM

(12.3) Capital intensity ratio Answer: b MEDIUM

(12.3) Capital intensity ratio Answer: a MEDIUM

Page 8 True/False Chapter 12

(12.3) Sustainable growth rate Answer: b MEDIUM

(12.4) Financial forecasting Answer: b MEDIUM

(12.5) Forecasting when ratios chg. Answer: a MEDIUM

Multiple Choice: Conceptual

a. The mission statement.

Chapter 12 Conceptual M/C Page 9

a. None of the firm's ratios will change.

(12.3) Additional funds needed Answer: a EASY/MEDIUM

a. A sharp increase in its forecasted sales.

(12.3) Additional funds needed Answer: b EASY/MEDIUM

a. Funds that are obtained automatically from routine business

Page 10 Conceptual M/C Chapter 12

a. Sales divided by total assets, i.e., the total assets turnover

Chapter 12 Conceptual M/C Page 11

a. Forecast the funds that will be generated internally. If internal

(12.3) Spontaneous funds Answer: d MEDIUM

a. Assets required per dollar of sales.

(12.3) Additional funds needed Answer: b MEDIUM

Page 12 Conceptual M/C Chapter 12

a. Perhaps the most important step when developing forecasted financial

(12.1) Strategic planning Answer: c MEDIUM/HARD

Chapter 12 Conceptual M/C Page 13

a. Since accounts payable and accrued liabilities must eventually be

Page 14 Conceptual M/C Chapter 12

a. Any forecast of financial requirements involves determining how much

(12.3) AFN equation Answer: a MEDIUM/HARD

a. The sustainable growth rate is the maximum achievable growth rate

Chapter 12 Conceptual M/C Page 15

(12.5) Excess capacity Answer: c MEDIUM

Page 16 Problems Chapter 12

(12.5) Finding target FA/S ratio Answer: b MEDIUM

(12.3) Positive AFN Answer: d MEDIUM/HARD

Last year’s sales = S0 $350 Last year’s accounts payable $40

Chapter 12 Problems Page 17

Last year’s sales = S0 $200,000 Last year's accounts payable $50,000

(12.3) AFN--changing div. payout Answer: b MEDIUM/HARD

AFN = (A0/S0)ΔS – (L0/S0)ΔS – Profit margin × S1 × (1 − Payout)

AFN = (A0/S0)ΔS – (L0/S0)ΔS – Profit margin × S1 × (1 − Payout)

AFN = (A0/S0)ΔS – (L0/S0)ΔS – Profit margin × S1 × (1 − Payout)