Exam 13: Understanding Financial Statements and Forecasting

What is included on a cash flow statement?

Inventory is a relatively permanent asset that is intended for use in the business rather than for sale.

The income statement is divided into three areas: cash flows from operations,investments made by the firm,and financing transactions.

A financial manager is projecting the firm's cash inflows and outflows to determine if the company will need to increase the loan it has with its bank.What is the manager working on?

Which of the following is a fixed asset?

What is directly involved in a firm's management of its working capital?

An accountant of a clothing distributor calculates the sales of summer clothes less the amount owed the manufacturer of the summer clothes.What did the accountant calculate?

A company has revenues of $700,000; invested capital of $3,000,000; total debt of $ 1,500,000 of which it pays 2.5% interest; current,long-term,and other assets totalling $4,000,000; and total expenses of $550,000.What is the company's financial leverage?

Michael's company purchases special equipment from Switzerland that can produce very thin plastic parts with very low rejections.Michael forecasts a continual increase in sales.According to the Asset-to-Sales Financing Relationship,what will be the result of Michael's forecast?

Carol underestimated how many roses she would sell on Mother's Day.She was able to find a local grower willing to open his greenhouse and she arranged with the bank to increase her credit limit to purchase more roses.What is this an example of?

Cost of goods sold is the cost of producing or acquiring goods or services to be sold by a firm.

The controller of a company requests from a manager a listing of creditors to be paid within one year.Which of the following will provide this information?

What ratios are involved in measuring a firm's liquidity?

Explain the importance of financial management for new ventures.

Accounts payable consist of payments due from a firm's customers.

Accounts receivable records are vital in order to maintain good customer relations.

A financial manager is evaluating the sources of cash for the company as part of cash budget analysis.Which of the following would she include as a source of cash?

The cash flow statement covers a specific period of time.

A company's president identifies an opportunity to expand globally but will require cash flow on short notice.He requests a list of assets that can be converted into cash in less than one year.Which category provides this information?

Jim is a refrigeration electrician.He has a large contract starting soon and knows he will run short of cash in purchasing supplies.However,he expects the client to begin making payments for his work two weeks after he begins.What financing arrangement would be best for Jim to arrange with his bank?