Exam 11: Forecasting Financial Requirements

Projecting financials may present a challenge because in a startup business,

High-tech businesses (such as computer manufacturers) generally require fewer assets than service businesses.

Match the term with its definition. -A method of forecasting asset requirements

Match the term with its definition. -A listing of cash receipts and cash disbursements, usually for a relatively short time period

Jake has prepared pro forma financial statements for his landscaping business. At the minimum, how often should he check results and make modifications as needed?

Willar expects his new business to support him and his family. This means his asset and financing requirements will:

The projection of profits, asset requirements, financing requirements and cash flows are essential in determining whether a venture is economically viable.

Financial forecasts are required by lenders since they will want to know how they will be paid back; investors will use the forecasts to value the company.

Briefly explain liquidity and its relationship to the current ratio.

Verlin wants to avoid a common mistake often made by new entrepreneurs. What advice would you give him?

No single planning document is more important in the life of a company than the

Which source of information would be the most inclusive for an entrepreneur determining information to complete the financial statements?

Discuss factors that drive profits in the order that they appear on the income statement.

Financial projections should be limited to the income statement to prevent information overload on lenders and investors.

The percentage-of-sales technique is an effective method for a new company to estimate asset requirements because asset-to-liabilities ratios tend to be relatively constant within an industry.

Alex wants to make sure he has enough liquid assets to pay his current bills. To do this, he should calculate his firm's:

Faye is developing a statement of cash flows for Yummy Gummies, a candy company that she owns. She has a net profit of $15,000 and an increase in inventory of $7,500. She took out a line of credit with her bank to finance her business and has decreased accounts receivable by $4,000. She has also invested in equipment for shaping her candy. How will the above information be listed on the cash flow statement?

An entrepreneur should always project at least two scenarios for financial forecasting and budgeting: best case, worst case, and most likely case..

Bettina plans to draw an income from her new business but her personal living expenses are not needed in the financial plan unless these expenses are part of the capitalization of the business.

The conventional measure of liquidity is the current ratio, which compares the current assets to total liabilities on a relative basis.