Exam 4: Cash Flow and Financial Planning

Table 4.1 Ruff Sandpaper Co. Balance Sheets For the Years Ended 2009 and 2010 -The firm's cash flow from operating activities is ________. (See Table 4.1)

Harry's House of Hamburgers (HHH) wants to prepare a cash budget for months of September through December. Using the following information, prepare the cash budget schedule and interpret the results. ∙ Sales were $50,000 in June and $60,000 in July. Sales have been forecasted to be $65,000, $72,000, $63,000, $59,000, and $56,000 for months of August, September, October, November, and December, respectively. In the past, 10 percent of sales were on cash basis, and the collection were 50 percent in the first month, 30 percent in the second month, and 10 percent in the third month following the sales. ∙ Every four months (three times a year) $500 of dividends from investments are expected. The first dividend payment was received in January. ∙ Purchases are 60 percent of sales, 15 percent of which are paid in cash, 65 percent are paid one month later, and the rest is paid two months after purchase. ∙ $8,000 dividends are paid twice a year (in March and September). ∙ The monthly rent is $2,000. ∙ Taxes are $6,500 payable in December. ∙ A new hamburger press will be purchased in October for $2,300. ∙ $1,500 interest will be paid in November. ∙ $1,000 loan payments are paid every month. ∙ Wages and salaries are $1,000 plus 5 percent of sales in each month. ∙ August's ending cash balance is $3,000. ∙ HHH would like to maintain a minimum cash balance of $10,000.

Generally, firms that are subject to high degrees of operating uncertainty, relatively short production cycles, or both tend to use a shorter planning horizon.

A weakness of the percent-of-sales method to preparing a pro forma income statement is

Free cash flow (FCF) is the cash flow a firm generates from its normal operations; calculated as EBIT - taxes + depreciation.

Under MACRS, an asset which originally cost $10,000 is being depreciated using a 5-year normal recovery period. What is the depreciation expense in year 3?

Cash flows that result from debt and equity financing transactions, including incurrence and repayment of debt, cash inflows from the sale of stock, and cash outflows to pay cash dividends or repurchase stock are called

All of the following are non-cash charges EXCEPT

Table 4.5 A financial manager at General Talc Mines has gathered the financial data essential to prepare a pro forma balance sheet for cash and profit planning purposes for the coming year ended December 31, 2010. Using the percent-of-sales method and the following financial data, prepare the pro forma balance sheet in order to answer the following multiple choice questions. (a) The firm estimates sales of $1,000,000. (b) The firm maintains a cash balance of $25,000. (c) Accounts receivable represents 15 percent of sales. (d) Inventory represents 35 percent of sales. (e) A new piece of mining equipment costing $150,000 will be purchased in 2010. Total depreciation for 2010 will be $75,000. (f) Accounts payable represents 10 percent of sales. (g) There will be no change in notes payable, accruals, and common stock. (h) The firm plans to retire a long term note of $100,000. (i) Dividends of $45,000 will be paid in 2010. (j) The firm predicts a 4 percent net profit margin. Balance Sheet General Talc Mines December 31, 2009 -General Talc Mines may prepare to ________. (See Table 4.5)

A firm has actual sales in November of $1,000 and projected sales in December and January of $3,000 and $4,000, respectively. The firm makes 10 percent of its sales for cash, collects 40 percent of its sales one month following the sale, and collects the balance two months following the sale. The firm's total expected cash receipts in January

Table 4.1 Ruff Sandpaper Co. Balance Sheets For the Years Ended 2009 and 2010 -Common stock dividends paid in 2010 amounted to ________. (See Table 4.1)

All of the following are ways to reduce coping with uncertainty in the cash budget EXCEPT

The strategic financial plans are planned long-term financial actions and the anticipated financial impact of those actions.

In April, a firm had an ending cash balance of $35,000. In May, the firm had total cash receipts of $40,000 and total cash disbursements of $50,000. The minimum cash balance required by the firm is $25,000. At the end of May, the firm had

A firm has just ended the calendar year making a sale in the amount of $200,000 of merchandise purchased during the year at a total cost of $150,500. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. One possible problem this firm may face is

Calculate a firm's free cash flow if it has net operating profit after taxes of $60,000, depreciation expense of $10,000, net fixed asset investment requirement of $40,000, a net current asset requirement of $30,000 and a tax rate of 30%.

If the net cash flow is less than the minimum cash balance, financing is required.

Under the basic MACRS procedures, the depreciable value of an asset is its full cost, including outlays for installation.

Net operating profit after taxes (NOPAT) represents the firm's earnings after deducting both interest taxes.

A firm has actual sales in November of $1,000 and projected sales in December and January of $3,000 and $4,000, respectively. The firm makes 10 percent of its sales for cash, collects 40 percent of its sales one month following the sale, and collects the balance two months following the sale. The firm's total cash receipts in November