Question 1

A firm's pro forma balance sheet typically starts with liabilities and equity and THEN proceeds to assets

Accepted Answer

A) True 
 B)False

Question 2

A firm's ending equity equals the firms beginning equity less any change in long-term debt.

Accepted Answer

A) True 
 B)False

Question 3

Pro forma financial statements may be valuable for which of the following reasons?

Accepted Answer

A) To help us estimate how profitable a firm is expected to be 
B) To help determine if and how much debt financing is required 
C) To help banks determine if firms are likely to meet lending standards 
D) All of the above 
A) To help us estimate how profitable a firm is expected to be 
B) To help determine if and how much debt financing is required 
C) To help banks determine if firms are likely to meet lending standards 
D) All of the above

Question 4

Table 6.2
 
-On -The-Level Manufacturing buys materials on credit at the start of the month and pays in 60 days.They also sell on credit,bill customers at the beginning of the month,and receive payment 30 days later.Using Table 6.2,what is the net cash flow from purchases and sales for the month of March?

Accepted Answer

A) There is NOT enough information to answer this question. 
B) $40,000 
C) $45,000 
D) -$45,000 
A) There is NOT enough information to answer this question. 
B) $40,000 
C) $45,000 
D) -$45,000

Question 5

-Use the information provided to complete the pro forma income statement and balance sheet for J.W.Bracken Inc.

Accepted Answer

The answer of    
-Use the information provided...

Question 6

Sensitivity analysis highlights the impact of a change in one key variable on another key variable.

Accepted Answer

A) True 
 B)False

Question 7

Other things equal,a higher leverage ratio implies:

Accepted Answer

A) a higher ROA. 
B) lower financial risk for shareholders. 
C) greater financial risk for shareholders. 
D) a lower ROE. 
A) a higher ROA. 
B) lower financial risk for shareholders. 
C) greater financial risk for shareholders. 
D) a lower ROE.

Question 8

"Unfortunately,one thing we know for certain about financial forecasts is that they are almost always wrong." If the preceeding statement is generally thought to be true,why do we spend so much time and money on financial forecasting?!

Accepted Answer

Perhaps one way to address this statemen

Question 9

A cash budget is often more valuable as a SHORT-term rather than a LONG-TERM financial forecasting vehicle.

Accepted Answer

A) True 
 B)False

Question 10

Pro forma income statements are primarily based on forecasted sales and assumed relationships related to sales.

Accepted Answer

A) True 
 B)False

Question 11

When constructing pro forma income statements which of the following is the last item to be estimated?

Accepted Answer

A) sales 
B) the change in retained earnings 
C) depreciation expense 
D) taxes 
A) sales 
B) the change in retained earnings 
C) depreciation expense 
D) taxes

Question 12

Which of the following equations represents a simple and effective way to think about anticipated external funding?

Accepted Answer

A) External funds required = assets - liabilities - equity 
B) External funds required = assets + liabilities - equity 
C) External funds required = assets + liabilities + equity 
D) External funds required = assets - liabilities + equity 
A) External funds required = assets - liabilities - equity 
B) External funds required = assets + liabilities - equity 
C) External funds required = assets + liabilities + equity 
D) External funds required = assets - liabilities + equity

Question 13

Which of following is NOT a variable in the equation for sustainable growth?

Accepted Answer

A) profit ratio 
B) net working capital ratio 
C) asset turnover ratio 
D) leverage ratio 
A) profit ratio 
B) net working capital ratio 
C) asset turnover ratio 
D) leverage ratio

Question 14

Managers often begin with an estimate of ________ when beginning to develop pro forma financial statements.

Accepted Answer

A) net income 
B) sales 
C) assets 
D) equity 
A) net income 
B) sales 
C) assets 
D) equity

Question 15

The ________ is the maximum a firm can grow with internally generated equity and new borrowing sufficient to maintain the current long-term-debt to equity ratio.

Accepted Answer

A) internal growth rate 
B) sustainable growth rate 
C) return on equity 
D) return on assets 
A) internal growth rate 
B) sustainable growth rate 
C) return on equity 
D) return on assets

Question 16

It is common to use the change in long-term debt as a "plug" figure in the construction of a pro forma balance sheet.However,if the firm does not have long-term debt,which of the following could substitute as the final plug figure?

Accepted Answer

A) changes in short-term debt 
B) changes in new equity 
C) changes in the cash balance 
D) All of the above 
A) changes in short-term debt 
B) changes in new equity 
C) changes in the cash balance 
D) All of the above

Question 17

Which of the following choices would NOT be considered a cash outflow?

Accepted Answer

A) operational expenses 
B) anticipated sales 
C) selling,general,and administrative expenses 
D) capital expenditures 
A) operational expenses 
B) anticipated sales 
C) selling,general,and administrative expenses 
D) capital expenditures

Question 18

Because key variables are often related rather than isolated we often change our estimates for selected variables simultaneously when examining pro forma statements.We call this type of activity:

Accepted Answer

A) ratio analysis. 
B) scenario analysis. 
C) sensitivity analysis. 
D) form analysis. 
A) ratio analysis. 
B) scenario analysis. 
C) sensitivity analysis. 
D) form analysis.

Question 19

If a firm is trying to grow more rapidly,which of the following identifies a non-financially-related course of action?

Accepted Answer

A) increase the retention ratio 
B) reduce dividends 
C) increase asset turnover 
D) increase the debt to equity ratio 
A) increase the retention ratio 
B) reduce dividends 
C) increase asset turnover 
D) increase the debt to equity ratio

Question 20

In constructing a pro forma balance sheet,which of the following fills the role of being the "plug" figure to balance the balance sheet?

Accepted Answer

A) external financing 
B) the change in retained earnings 
C) accounts payable 
D) accounts receivable 
A) external financing 
B) the change in retained earnings 
C) accounts payable 
D) accounts receivable

A firm's pro forma balance sheet typically starts with liabilities and equity and THEN proceeds to assets

A firm's ending equity equals the firms beginning equity less any change in long-term debt.

Pro forma financial statements may be valuable for which of the following reasons?

-Use the information provided to complete the pro forma income statement and balance sheet for J.W.Bracken Inc.

Sensitivity analysis highlights the impact of a change in one key variable on another key variable.

Other things equal,a higher leverage ratio implies:

"Unfortunately,one thing we know for certain about financial forecasts is that they are almost always wrong." If the preceeding statement is generally thought to be true,why do we spend so much time and money on financial forecasting?!

A cash budget is often more valuable as a SHORT-term rather than a LONG-TERM financial forecasting vehicle.

Pro forma income statements are primarily based on forecasted sales and assumed relationships related to sales.

When constructing pro forma income statements which of the following is the last item to be estimated?

Which of the following equations represents a simple and effective way to think about anticipated external funding?

Which of following is NOT a variable in the equation for sustainable growth?

Managers often begin with an estimate of ________ when beginning to develop pro forma financial statements.

The ________ is the maximum a firm can grow with internally generated equity and new borrowing sufficient to maintain the current long-term-debt to equity ratio.

It is common to use the change in long-term debt as a "plug" figure in the construction of a pro forma balance sheet.However,if the firm does not have long-term debt,which of the following could substitute as the final plug figure?

Which of the following choices would NOT be considered a cash outflow?

Because key variables are often related rather than isolated we often change our estimates for selected variables simultaneously when examining pro forma statements.We call this type of activity:

If a firm is trying to grow more rapidly,which of the following identifies a non-financially-related course of action?

In constructing a pro forma balance sheet,which of the following fills the role of being the "plug" figure to balance the balance sheet?

Overview of Financial Management

Sizing up a Business: a Non-Financial Perspective

Understanding Financial Statements

Measuring Financial Performance

Managing Day-To-Day Cash Flow

Time Value of Money Basics and Applications

Making Investment Decisions

Overview of Capital Markets: Long-Term Financing Instruments

Assessing the Cost of Capital: What Return Investors Require

Understanding Financing and Payout Decisions

Designing an Optimal Capital Structure

Measuring and Creating Value

Comprehensive Case Study: Wal-Mart Stores,inc

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Exam 6: Projecting Financial Requirements and Managing Growth

A firm's pro forma balance sheet typically starts with liabilities and equity and THEN proceeds to assets

A firm's ending equity equals the firms beginning equity less any change in long-term debt.

Pro forma financial statements may be valuable for which of the following reasons?

-Use the information provided to complete the pro forma income statement and balance sheet for J.W.Bracken Inc.

Sensitivity analysis highlights the impact of a change in one key variable on another key variable.

Other things equal,a higher leverage ratio implies:

"Unfortunately,one thing we know for certain about financial forecasts is that they are almost always wrong." If the preceeding statement is generally thought to be true,why do we spend so much time and money on financial forecasting?!

A cash budget is often more valuable as a SHORT-term rather than a LONG-TERM financial forecasting vehicle.

Pro forma income statements are primarily based on forecasted sales and assumed relationships related to sales.

When constructing pro forma income statements which of the following is the last item to be estimated?

Which of the following equations represents a simple and effective way to think about anticipated external funding?

Which of following is NOT a variable in the equation for sustainable growth?

Managers often begin with an estimate of ________ when beginning to develop pro forma financial statements.

The ________ is the maximum a firm can grow with internally generated equity and new borrowing sufficient to maintain the current long-term-debt to equity ratio.

It is common to use the change in long-term debt as a "plug" figure in the construction of a pro forma balance sheet.However,if the firm does not have long-term debt,which of the following could substitute as the final plug figure?

Which of the following choices would NOT be considered a cash outflow?

Because key variables are often related rather than isolated we often change our estimates for selected variables simultaneously when examining pro forma statements.We call this type of activity:

If a firm is trying to grow more rapidly,which of the following identifies a non-financially-related course of action?

In constructing a pro forma balance sheet,which of the following fills the role of being the "plug" figure to balance the balance sheet?

Overview of Financial Management

Sizing up a Business: a Non-Financial Perspective

Understanding Financial Statements

Measuring Financial Performance

Managing Day-To-Day Cash Flow

Time Value of Money Basics and Applications

Making Investment Decisions

Overview of Capital Markets: Long-Term Financing Instruments

Assessing the Cost of Capital: What Return Investors Require

Understanding Financing and Payout Decisions

Designing an Optimal Capital Structure

Measuring and Creating Value

Comprehensive Case Study: Wal-Mart Stores,inc

Filters