Exam 17: Financial Forecasting and Planning

Which of the following is a spontaneous source of financing?

Pro forma financial statements are a required part of the firm's tax returns.

The ZYX Corporation is planning to request a line of credit from its bank and wants to estimate its cash needs for the month of September.The following sales forecasts have been made for 2014: July $500,000 August $400,000 September $300,000 October $200,000 November $100,000 Collection estimates were obtained from the credit collection department as follows: 20% collected within the month of sale;70% collected the first month following the sale;and 10% collected the second month following the sale.Payments for labor and raw materials are typically made in the month in which these costs are incurred.Total labor and raw material costs each month are 50% of sales.General administrative expenses are $30,000 per month,lease payments are $10,000 per month,and depreciation charges are $20,000 per month.The corporation tax rate is 40%;however,no corporate taxes are paid in September.Prepare a cash budget for September.

An increase in projected ________ will increase discretionary funds needed.

The timing of collections from sales made in past months is an important consideration for cash budgeting.

The percentages used in the percent-of-sales method comes from pro forma financial statements.

Broad Cloth,Inc.'s average collection period is 15 days.The vice-president of marketing has projected credit sales of $2.million for October,$2.5 million for November and $3 million for December.Purchases equal 60% of sales and are made one month in advance of budgeted sales.Payments are made 1 month after the date of purchase.Compute payments for purchases for the months of November and December.

Use the following information and the percent-of-sales method to answer the following question(s). Below is the 2014 year-end balance sheet for Banner,Inc.Sales for 2014 were $1,600,000 and are expected to be $2,000,000 during 2015.In addition,we know that Banner plans to pay $90,000 in 2015 dividends and expects projected net income of 4% of sales.(For consistency with the Answer selections provided,round your forecast percentages to two decimals. ) Banner,Inc.Balance Sheet December 31,2014 Assets Current assets $890,000 Net fixed assets 1,000,000 Total $1,890,000 Liabilities and Owners' Equity Accounts payable $160,000 Accrued expenses 100,000 Notes payable 700,000 Long-term debt 300,000 Total liabilities 1,260,000 Common stock (plus paid-in capital)360,000 Retained earnings 270,000 Common equity 630,000 Total 1,890,000 -Banner's projected accrued expenses for 2015 are

Based on the information in Table 1,what is Dorian's projected EBIT for March 2014?

Which of the following will decrease cumulative borrowing on the cash budget?

Long-term financial planning results in

Short-term financial planning results in

Use the following information and the percent-of-sales method to answer the following question(s). Below is the 2014 year-end balance sheet for Banner,Inc.Sales for 2014 were $1,600,000 and are expected to be $2,000,000 during 2015.In addition,we know that Banner plans to pay $90,000 in 2015 dividends and expects projected net income of 4% of sales.(For consistency with the Answer selections provided,round your forecast percentages to two decimals. ) Banner,Inc.Balance Sheet December 31,2014 Assets Current assets $890,000 Net fixed assets 1,000,000 Total $1,890,000 Liabilities and Owners' Equity Accounts payable $160,000 Accrued expenses 100,000 Notes payable 700,000 Long-term debt 300,000 Total liabilities 1,260,000 Common stock (plus paid-in capital)360,000 Retained earnings 270,000 Common equity 630,000 Total 1,890,000 -Banner's projected discretionary financing needed for 2015 is

Which of the following are considered to be spontaneous sources of financing (i.e. ,they arise naturally during the course of doing business)?

The cash budget can be used to provide an estimate of the firm's future financing needs.

What is meant by spontaneous financing?

Which of the following will reduce the firm's financing requirements?

The financial planning process is the responsibility of

What is the most important ingredient in developing a firm's financial plan?

The first step involved in predicting financing needs is