Exam 4: Cash Flow and Financial Planning

________ forecast is based on a buildup, or consensus, of sales forecasts through the firm's own sales channels, adjusted for additional factors such as production capabilities.

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method used for ________ purposes.

In cash budgeting, the ________ seasonal and uncertain a firm's cash flows, the ________ the number of budgeting intervals it should use.

The firm's final sales forecast is usually a function of

To assess whether any developments have occurred that are contrary to the company's financial policies, the financial manager should pay special attention to both the major categories of cash flow and the individual items of cash inflow and outflow.

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 -The pro forma total current assets amount is ________. (See Table 4.5)

Darling Paper Container, Inc. purchased several machines at a total cost of $300,000. The installation cost for this equipment was $25,000. The firm plans to depreciate the equipment using the MACRS 5-year normal recovery period. Prepare a depreciation schedule showing the depreciation expense for each year.

A firm has prepared the coming year's pro forma balance sheet resulting in a plug figure in a preliminary statement called the external financing required of negative $250,000. The firm may prepare to

A firm plans to depreciate a five year asset in the next planning period. The statements that will be directly affected immediately are the

Once sales are forecasted, ________ must be generated to estimate a variety of operating costs.

Utilizing past cost and expense ratios (percent-of-sales method) when preparing pro forma financial statements will tend to

Given the financial manager's preference for faster receipt of cash flows, a longer depreciable life is preferred to a shorter one.

In the statement of cash flows, retained earnings are handled through the adjustment of which two accounts?

The primary purpose in preparing a cash budget is

The strict application of the percent-of-sales method to prepare a pro forma income statement assumes the firm has no fixed costs. Therefore, the use of the past cost and expense ratios generally tends to ________ profits when sales are increasing.

The statement of cash flows provides a summary of the firm's

The cash budget gives the financial manager a clear view of the timing of the firm's expected profitability over a given period.

Given the financial data for New Electronic World, Inc. (NEW), compute the following measures of cash flows for the NEW for the year ended December 31, 2010 (a) Operating Cash Flow. (b) Free Cash Flow. For the year ended December 31,

Which of the following would be the least likely to utilize pro forma financial statements or a cash budget?

Calculate net operating profit after taxes (NOPAT) if a firm has sales of $1,000,000, operating profit (EBIT) of $100,000, interest expense of $50,000, and a tax rate of 30%.