Exam 11: Forecasting Financial Requirements

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

A line of credit is a short-term loan used in a business to help with financing fixed assets.

What are the categories that constitute working capital versus net working capital?

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

Faith is developing a statement of cash flows for Yummy Gummies, a candy company that she owns.She has a net profit of R15 000 and an increase in inventory of R7 500.She took out a line of credit with her bank to finance her business and has decreased trade receivables by R4 000.She has also invested in equipment for shaping her candy.How will the above information be listed on the statement of cash flows?

Match the term with its definition. a.Cash budget b.Current ratio c.Line of credit d.Net working capital e.Pro forma financial statements f.Percentage-of-sales technique g.Spontaneous debt financing -Current assets less current liabilities.

Match the term with its definition. a.Cash budget b.Current ratio c.Line of credit d.Net working capital e.Pro forma financial statements f.Percentage-of-sales technique g.Spontaneous debt financing -Statements that project a business's financial performance and condition, including projected profits, assets and financing requirements and cash flows.

Where should Rose put the administrative expenses for her business when she prepares the financial forecasts?

To be realistic, an entrepreneur should project profits only one year into the future.

Profits that are retained within the company rather than being distributed to the owners are referred to as retained income.

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:

Because Linda's new restaurant had a high volume of sales, her inventory needs increased illustrating that a business's asset needs are the primary force driving sales.

Match the term with its definition. a.Cash budget b.Current ratio c.Line of credit d.Net working capital e.Pro forma financial statements f.Percentage-of-sales technique g.Spontaneous debt financing -A method of forecasting asset requirements.

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

Even though Miriam projected an annual positive cash flow, she may run out of cash if:

Match the term with its definition. a.Cash budget b.Current ratio c.Line of credit d.Net working capital e.Pro forma financial statements f.Percentage-of-sales technique g.Spontaneous debt financing -Short-term debts, such as trade payables that automatically increase in proportion to a business's sales.

Zenzo had a great idea but no cash so he asked the bank for a loan to finance the entire operation.It seems he forgot that a bank would never provide _______ % of the business's financing.

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

The greater a business's sales, the greater need for financing because of greater _____ requirements.