Question 1

Types of plans that businesses typically use to guide their operations include

Accepted Answer

A) strategic plans. 
B) long-range financial plans. 
C) short-range financial plans. 
D) all of the above. 
A) strategic plans. 
B) long-range financial plans. 
C) short-range financial plans. 
D) all of the above.

Question 2

When forecasting statements,assets always increase proportionately to sales regardless of capacity.

Accepted Answer

A) True 
 B)False

Question 3

Long-term financial plans must include capital expenditures.

Accepted Answer

A) True 
 B)False

Question 4

The preparation of a cash budget serves which of the following purposes?

Accepted Answer

A) To estimate the amount and timing of cash flows that are needed in order to optimize the price of the firm's common stock 
B) To calculate the amount of future cash flows that would be needed in order to achieve the optimal level of financing during the forecast period 
C) To determine the amount and timing of short-term financing that would be required for the operation of a business during the forecast period 
D) To estimate the amount of sales volume that would be required in order to achieve the break-even point 
A) To estimate the amount and timing of cash flows that are needed in order to optimize the price of the firm's common stock 
B) To calculate the amount of future cash flows that would be needed in order to achieve the optimal level of financing during the forecast period 
C) To determine the amount and timing of short-term financing that would be required for the operation of a business during the forecast period 
D) To estimate the amount of sales volume that would be required in order to achieve the break-even point

Question 5

Strategic planning encompasses all of the following EXCEPT

Accepted Answer

A) a cash budget. 
B) a description of the firm's core competencies and activities. 
C) a definition of the firm's customers. 
D) a description of the firm's competitors and its own competitive strengths and weaknesses. 
A) a cash budget. 
B) a description of the firm's core competencies and activities. 
C) a definition of the firm's customers. 
D) a description of the firm's competitors and its own competitive strengths and weaknesses.

Question 6

Spontaneous sources of financing include

Accepted Answer

A) accounts payable and accrued expenses. 
B) notes payable and mortgages payable. 
C) long-term debt and capital leases. 
D) common stock and paid-in capital. 
A) accounts payable and accrued expenses. 
B) notes payable and mortgages payable. 
C) long-term debt and capital leases. 
D) common stock and paid-in capital.

Question 7

Assume that Gatsby Enterprises has sales of $83 million and fixed assets of $22.4 million in 2013.The corporation utilizes the percent-of-sales method of financial forecasting.If Gatsby is expected to generate sales of $94 million in 2014,what will the firm's investment in fixed assets be? The minimum fixed asset expansion costs $4,000,000.

Accepted Answer

A) $19.8 million 
B) $26.4 million 
C) $16.2 million 
D) $25.4 million 
A) $19.8 million 
B) $26.4 million 
C) $16.2 million 
D) $25.4 million

Question 8

Apple Two Enterprises expects to generate sales of $5,950,000 for fiscal 2014;sales were $3,450,000 in fiscal 2013.Assume the following figures for the fiscal year ending 2013: cash $70,000;accounts receivable $250,000;inventory $400,000;net fixed assets $520,000;accounts payable $235,000;and accruals $155,000.Use the percent-of-sales method to forecast cash for the fiscal year ending 2014.

Accepted Answer

A) $120,725 
B) $75,003 
C) $216,418 
D) $319,604 
A) $120,725 
B) $75,003 
C) $216,418 
D) $319,604

Question 9

Purchases of plant and equipment can be determined from the

Accepted Answer

A) current cash budget. 
B) previous period's balance sheet. 
C) pro forma income statement. 
D) use of ratio analysis. 
A) current cash budget. 
B) previous period's balance sheet. 
C) pro forma income statement. 
D) use of ratio analysis.

Question 10

Discretionary sources of financing are those sources that vary automatically with a firm's level of sales.

Accepted Answer

A) True 
 B)False

Question 11

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 fixed assets for 2015 are

Accepted Answer

A) $1,120,000. 
B) $1,260,000. 
C) $1,000,000. 
D) $2,380,000. 
A) $1,120,000. 
B) $1,260,000. 
C) $1,000,000. 
D) $2,380,000.

Question 12

It is common practice to develop optimistic and pessimistic scenarios when projecting financial statements.

Accepted Answer

A) True 
 B)False

Question 13

Based on the information in Table 1,what are Dorian Industries' total cash receipts (collections)for April 2014?

Accepted Answer

A) $400,000 
B) $300,000 
C) $100,000 
D) ($60,000) 
A) $400,000 
B) $300,000 
C) $100,000 
D) ($60,000)

Question 14

The projected change in retained earnings equals projected net income less any dividends to be paid.

Accepted Answer

A) True 
 B)False

Question 15

The function of a budget includes to

Accepted Answer

A) indicate the amount and time of future financing needs. 
B) provide a basis for corrective action. 
C) provide information for performance evaluations. 
D) all of the above. 
A) indicate the amount and time of future financing needs. 
B) provide a basis for corrective action. 
C) provide information for performance evaluations. 
D) all of the above.

Question 16

The initiation of a major advertising campaign would be an example of an event that would affect past trends in sales when projecting statements.

Accepted Answer

A) True 
 B)False

Question 17

All of the following are found in the cash budget EXCEPT

Accepted Answer

A) a net change in cash for the period. 
B) inventory. 
C) cash disbursements. 
D) new financing needed. 
A) a net change in cash for the period. 
B) inventory. 
C) cash disbursements. 
D) new financing needed.

Question 18

Depreciation expense is always included in the cash budget as it reflects the impact of fixed asset purchases.

Accepted Answer

A) True 
 B)False

Question 19

Because financial planning usually takes place in a highly uncertain environment

Accepted Answer

A) it is rarely worth the time and expense. 
B) time horizons should be limited to a few months. 
C) it is important to develop contingency plans to respond to unexpected events. 
D) it should avoid such specific issues as what sources of financing to use. 
A) it is rarely worth the time and expense. 
B) time horizons should be limited to a few months. 
C) it is important to develop contingency plans to respond to unexpected events. 
D) it should avoid such specific issues as what sources of financing to use.

Question 20

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 long-term debt for 2015 is

Accepted Answer

A) $700,000. 
B) $880,000. 
C) $380,000. 
D) $300,000. 
A) $700,000. 
B) $880,000. 
C) $380,000. 
D) $300,000.

Types of plans that businesses typically use to guide their operations include

When forecasting statements,assets always increase proportionately to sales regardless of capacity.

Long-term financial plans must include capital expenditures.

The preparation of a cash budget serves which of the following purposes?

Strategic planning encompasses all of the following EXCEPT

Spontaneous sources of financing include

Purchases of plant and equipment can be determined from the

Discretionary sources of financing are those sources that vary automatically with a firm's level of sales.

It is common practice to develop optimistic and pessimistic scenarios when projecting financial statements.

Based on the information in Table 1,what are Dorian Industries' total cash receipts (collections)for April 2014?

The projected change in retained earnings equals projected net income less any dividends to be paid.

The function of a budget includes to

The initiation of a major advertising campaign would be an example of an event that would affect past trends in sales when projecting statements.

All of the following are found in the cash budget EXCEPT

Depreciation expense is always included in the cash budget as it reflects the impact of fixed asset purchases.

Because financial planning usually takes place in a highly uncertain environment

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements,taxes,and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Working Capital Management

International Business Finance

Corporate Risk Management

Filters

Exam 17: Financial Forecasting and Planning

Types of plans that businesses typically use to guide their operations include

When forecasting statements,assets always increase proportionately to sales regardless of capacity.

Long-term financial plans must include capital expenditures.

The preparation of a cash budget serves which of the following purposes?

Strategic planning encompasses all of the following EXCEPT

Spontaneous sources of financing include

Purchases of plant and equipment can be determined from the

Discretionary sources of financing are those sources that vary automatically with a firm's level of sales.

It is common practice to develop optimistic and pessimistic scenarios when projecting financial statements.

Based on the information in Table 1,what are Dorian Industries' total cash receipts (collections)for April 2014?

The projected change in retained earnings equals projected net income less any dividends to be paid.

The function of a budget includes to

The initiation of a major advertising campaign would be an example of an event that would affect past trends in sales when projecting statements.

All of the following are found in the cash budget EXCEPT

Depreciation expense is always included in the cash budget as it reflects the impact of fixed asset purchases.

Because financial planning usually takes place in a highly uncertain environment

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements,taxes,and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Working Capital Management

International Business Finance

Corporate Risk Management

Filters