Exam 17: Financial Forecasting and Planning

Which of the following statements about the percent-of-sales method of financial forecasting is true?

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 current assets for 2015 are

As of December 31,Budget,Inc.had a cash balance of $50,000.December sales were $150,000 and are expected to be $100,000 in January.20% of sales in any month are cash sales,and 80% of sales are collected during the following month.In January,Budget is expected to have total cash disbursements of $120,000,and Budget requires a minimum cash balance of $50,000.Budget's expected cash receipts for January are

Cash budgets usually include details such as the timing of materials purchases,interest payments,and the like.

Based on the information in Table 2,what was Fielding's projected loss for March?

Which of the following will increase cumulative borrowing in the cash budget?

What are the key questions that a strategic plan attempts to answer? How does it relate to financial plans?

If the firm's current fixed assets are sufficient to support the projected level of new sales,then these assets would be projected to remain unchanged for the forecast period.

The treasurer for Brookdale Clothing must decide how much money the company needs to borrow in July.The balance sheet for June 30,2014 is presented below: Brookdale Clothing Balance Sheet June 30,2014 Cash $75,000 Accounts payable $400,000 Marketable securities 100,000 Long-term debt 300,000 Accounts receivable 300,000 Common stock 100,000 Inventory 250,000 Retained earnings 200,000 Total current assets 725,000 Total liabilities and Fixed assets 275,000 stockholder's equity $1,000,000 Total assets $1,000,000 The company expects sales of $250,000 for July.The company has observed that 25% of its sales is for cash and that the remaining 75% is collected in the following month.The company plans to purchase $400,000 of new clothing.Usually 40% of purchases is for cash and the remaining 60% of purchases is paid in the following month.Salaries are $100,000 per month,lease payments are $50,000 per month,and depreciation charges are $20,000 per month.The company plans to purchase a new building for $200,000 in July and sell its marketable securities for $100,000.If the company must maintain a minimum cash balance of $50,000,how much money must the company borrow in July?

Your firm is trying to determine its cash disbursements for the next two months (June and July).In any month,the firm makes purchases of 60% of that month's sales,which are paid the following month.In addition,the firm incurs the following costs every month and pays for them in the month the expenses are incurred: wages/salaries of $10,000,rent of $4,000,and miscellaneous cash expenses of $1,000.Depreciation amortized on a monthly basis is $2,000.June's sales are expected to be $100,000,and July's sales are expected to be $150,000.Cash disbursements for the month of July are expected to be

Why is financial planning important in a highly uncertain financial environment.

Considering each action independently and holding other things constant,which of the following actions would increase a firm's discretionary financing needed (the need for additional capital)?

Au Courant Bakery is a new firm specializing in gluten free pastry products.In attempting to determine what the financial position of the firm should be,the financial manager obtained the following average data for the baking industry for 2014.All data is expressed as a percentage of sales. Fill in the dollar amounts on Au Courant's pro forma balance sheet assuming 2015 sales are $450,000. Au Courant Bakery Pro Forma Balance Sheet December 31,2015 Cash,2.22% Accounts payable,6.67% Accounts receivable,2.78% Long-term debt,6.67% Inventory,3% Total current assets ? Common equity,? Fixed assets ? Total liabilities and equity,? Total assets,33%

An exceptionally high growth rate in sales will typically

The "percentage" used in the percent-of-sales calculation can be obtained from

Based on the information in Table 3,what is Thompson's projected cash balance as of April 1,2014?

A discretionary form of financing would be

Pro forma statements are important since they formally report the performance of the firm during a previous reporting period.

Asset purchases frequently precede a rapid increase in sales and require increased discretionary financing.

Which of the following will decrease discretionary funds needed?