Exam 11: Forecasting Financial Requirements

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

Briefly describe what a cash budget is and its importance to a small business.

Yvonne is planning a coffee shop. The cost of producing the coffee should be included in the _____ section of the pro forma financial statements.

Match the term with its definition. -A measure of a company's liquidity, equal to current assets less current liabilities

David has a company that decorates houses for the holidays. He has secured a $25,000 line of credit from his bank. David is most likely to use this line of credit for which of the following?

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

Briefly describe working capital and net working capital.

Marcia likes to use other people's money when financing her business. In this way, she "does more with less" by controlling resources without actually owning them.

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.

Cash flow can be projected in two ways: using the income statement to project cash flows or preparing a cash budget.

Roland has already projected his company's sales. The next step in forecasting his company's income is to project

D&R Products forecast a first-year asset requirement of $143,500; therefore, the total debt requirement is

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

Mario has high hopes for his new business and anticipates a very large profit margin. In preparing his forecasts, he should use industry averages regardless of his hopes.

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

When graphed, entrepreneurs' sales projections for a new venture often resemble a hockey stick-the sales numbers are flat or rise slightly at first (like the blade of a hockey stick) and then soar upward (like a hockey stick's handle).

Marcia uses other people's money whenever possible to finance her business. She prefers to minimize and control rather than to maximize and own resources. This practice is known as

The assets-to-sales relationship tends to be relatively constant within an industry, allowing for a(n) _____ technique to be utilized in projecting asset requirements.

The method of forecasting asset requirements is called the _____ technique.

Investors would like to know if Arthur's new business will have adequate cash flows. Arthur can provide this information in