Exam 6: Projecting Financial Requirements and Managing Growth

A firm that is growing more slowly than its sustainable growth rate may face which of the following scenarios if it generates excess cash rather than make greater investments in its own business?

The generation of cash budgets and and pro forma financial statements are equivalent ways of forecasting financial needs.

Which of the following choices would NOT be found on a pro forma balance sheet?

Pro forma financial statements are an accountant's way of looking back to see what "might have been."

The ________ is the critical connection between the pro forma income statement and the pro forma balance sheet.

If sales growth is SLOWER than the sustainable growth rate then the ROE is also lower.

When estimating a cash budget,which of the following items should the firm NOT include in the process?

Dunweiler Inc.,is developing a pro forma income statement for the coming year.The chief financial officer estimates that sales will be $150,000,000.If gross profits are historically 36% of sales,what is the expected cost of goods sold (in dollars)?

Your firm's sales are estimated to increase by 10% in the next year.However,soon after the beginning of the year it becomes apparent that the growth in sales is more likely to be 20%.If your cost of good sold consists of only variable expenses,and the relationship between revenues and costs remain the same,which of the following situations would you expect to be true?

A firm's ending equity equals the firms beginning equity plus any change in retained earnings.

Which of the following is the primary source of cash inflows in a pro forma cash budget?