Question 1

James is preparing his forecasts for the coming year.What kind of scenarios should he prepare when forecasting and budgeting?

Accepted Answer

A) Best and worst case scenarios. 
B) Most-likely and break-even case scenarios. 
C) Break-even and worst case scenarios. 
D) Most-likely and best case scenarios. 
A) Best and worst case scenarios. 
B) Most-likely and break-even case scenarios. 
C) Break-even and worst case scenarios. 
D) Most-likely and best case scenarios.

Question 2

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

Accepted Answer

A) variable expense 
B) amount of sales 
C) cost of goods sold 
D) operating expense 
A) variable expense 
B) amount of sales 
C) cost of goods sold 
D) operating expense

Question 3

Mark wants to make sure he does not run out of cash so he is preparing a monthly cash budget.After determining the percentage of cash collections by month, he should:

Accepted Answer

A) estimate the amount and timing of cash disbursements. 
B) calculate cash flow from operations. 
C) determine the end-of-month cash balance. 
D) determine beginning-of-the-month cash balance. 
A) estimate the amount and timing of cash disbursements. 
B) calculate cash flow from operations. 
C) determine the end-of-month cash balance. 
D) determine beginning-of-the-month cash balance.

Question 4

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.

Accepted Answer

A) True 
 B)False

Question 5

To project pro forma financial statements, speaking to others in the industry and researching industry averages are good starting points.

Accepted Answer

A) True 
 B)False

Question 6

D & R Products forecast a first year asset requirement of R143 500; therefore, the total debt requirement is

Accepted Answer

A) R143 500. 
B) a set percentage of sales. 
C) equal to the current ratio. 
D) dependent on the owner's equity amount. 
A) R143 500. 
B) a set percentage of sales. 
C) equal to the current ratio. 
D) dependent on the owner's equity amount.

Question 7

David has a company decorating houses for the holidays.He has secured a R25 000 line of credit from his bank.For which purpose is David more likely to use this credit line?

Accepted Answer

A) A warehouse to store decorations until they are sold. 
B) Labour to install the decorations in November. 
C) A truck with a ladder to put up lights. 
D) A full-time, year-round office person to answer phones and take orders. 
A) A warehouse to store decorations until they are sold. 
B) Labour to install the decorations in November. 
C) A truck with a ladder to put up lights. 
D) A full-time, year-round office person to answer phones and take orders.

Question 8

Briefly explain liquidity and its relationship to the current ratio.

Accepted Answer

Liquidity measures the degree to which a

Question 9

Entrepreneurs determine financial requirements based on ________.

Accepted Answer

A) predictions 
B) suggestions 
C) assumptions 
D) projections 
A) predictions 
B) suggestions 
C) assumptions 
D) projections

Question 10

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

Accepted Answer

A) statement of profit and loss. 
B) cash budget. 
C) statement of financial position. 
D) corporate charter. 
A) statement of profit and loss. 
B) cash budget. 
C) statement of financial position. 
D) corporate charter.

Question 11

Andrea is working on forecasting her financial statements for her consulting business.Discuss three suggestions for Andrea to make her forecasting more effective.

Accepted Answer

She should not guess or be vague.The spe

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Mary 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.

Accepted Answer

A) True 
 B)False

Question 14

D & R Products forecasts that it will require R10 000 for equipment and depreciation will be over five years.The R10 000 will be reflected in the statement of financial position as _____.

Accepted Answer

A) inventory 
B) gross fixed assets 
C) net fixed assets 
D) trade payables 
A) inventory 
B) gross fixed assets 
C) net fixed assets 
D) trade payables

Question 15

Tony operates a computer retail business.Based on the industry, how often should sales projections be for the company in projecting sales?

Accepted Answer

A) Monthly for Year 1; annual for Years 2 and 3. 
B) Annual for Year 1; quarterly for Years 2 and 3. 
C) Monthly for Year 1; quarterly for Years 2 and 3. 
D) Annual for Year 1, monthly for Years 2 and 3. 
A) Monthly for Year 1; annual for Years 2 and 3. 
B) Annual for Year 1; quarterly for Years 2 and 3. 
C) Monthly for Year 1; quarterly for Years 2 and 3. 
D) Annual for Year 1, monthly for Years 2 and 3.

Question 16

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

Accepted Answer

A) debt ratio. 
B) statement of cash flows. 
C) current ratio. 
D) asset turnover ratio. 
A) debt ratio. 
B) statement of cash flows. 
C) current ratio. 
D) asset turnover ratio.

Question 17

Mark follows the cash budget like it was carved in stone.He has fallen prey to the one real danger in over-reliance on a cash budget:

Accepted Answer

A) inflexibility. 
B) pliability. 
C) exaggeration. 
D) errors. 
A) inflexibility. 
B) pliability. 
C) exaggeration. 
D) errors.

Question 18

Maria uses other people's money whenever possible to finance her business.She prefers to minimise and control rather than maximise and own.This practice is known as:

Accepted Answer

A) high-stepping. 
B) bootstrapping. 
C) unethical business practice. 
D) taking advantage of others. 
A) high-stepping. 
B) bootstrapping. 
C) unethical business practice. 
D) taking advantage of others.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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 capitalisation of the business.

Accepted Answer

A) True 
 B)False

Exam 11: Forecasting Financial Requirements

James is preparing his forecasts for the coming year.What kind of scenarios should he prepare when forecasting and budgeting?

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

Mark wants to make sure he does not run out of cash so he is preparing a monthly cash budget.After determining the percentage of cash collections by month, he should:

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.

To project pro forma financial statements, speaking to others in the industry and researching industry averages are good starting points.

D & R Products forecast a first year asset requirement of R143 500; therefore, the total debt requirement is

David has a company decorating houses for the holidays.He has secured a R25 000 line of credit from his bank.For which purpose is David more likely to use this credit line?

Briefly explain liquidity and its relationship to the current ratio.

Entrepreneurs determine financial requirements based on ________.

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

Andrea is working on forecasting her financial statements for her consulting business.Discuss three suggestions for Andrea to make her forecasting more effective.

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

Mary 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.

D & R Products forecasts that it will require R10 000 for equipment and depreciation will be over five years.The R10 000 will be reflected in the statement of financial position as _____.

Tony operates a computer retail business.Based on the industry, how often should sales projections be for the company in projecting sales?

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

Mark follows the cash budget like it was carved in stone.He has fallen prey to the one real danger in over-reliance on a cash budget:

Maria uses other people's money whenever possible to finance her business.She prefers to minimise and control rather than maximise and own.This practice is known as:

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

The Entrepreneurial Life

Integrity, Ethics And, Social Entrepreneurship

Starting a Small Business

Franchising and Buyouts

The Family Business

The Business Plan: Visualizing the Dream

The Marketing Plan

The Organizational Plan: Teams, Legal Structures, Alliances, and Directors

The Location Plan

Understanding a Firms Financial Statements

A Firms Sources of Financing

Planning for the Harvest

Building Customer Relationships

Product and Supply Chain Management

Pricing and Credit Decisions

Promotional Planning

Global Opportunities for Small Business

Professional Management and the Small Business

Managing Human Resources

Managing Operations

Managing the Firms Assets

Managing Risk in the Small Business

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