Exam 11: Forecasting Financial Requirements

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?

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

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

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

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

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

Liquid assets include

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

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

The term net working capital equals current assets less total liabilities and is a measure of a company's liquidity.

Jill's business has current assets of $50,000 and current liabilities of $25,000.  Which statement is true about the company's current ratio?

David has a company decorating houses for the holidays.  He has secured a $25,000 line of credit from his bank.  For which purpose is David more likely to use this credit line?

Spontaneous debt financing results when accounts payable increase in proportion to a firm's profits.

For the typical small firm, the primary source of equity capital for financing growth is

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

D&R Products forecasts that it will require $10,000 for equipment and depreciation will be over 5 years.  The $10,000 will be reflected in the balance sheet as _____.

As Willard's business grows and propsers, his company's total assets requirements will equal ___________.

Explain the percentage-of-sales technique.  Will this technique differ by industry type?

Which action will be a concern for a prospective investor?

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.