Exam 17: Financial Forecasting and Planning

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 accounts payable for the fiscal year ending 2014.

Which of the following is a source of external capital?

The most commonly used method for making financial forecasts is the percent-of-sales method.

Based on the information in Table 1, what is Dorian's projected cumulative short-term borrowing as of April 30, 2017?

The preparation of pro forma financial statements accomplishes which of the following objectives?

A budget is a forecast of future events.

Banner's projected accrued expenses for 2018 are

Based on the information in Table 2, how much short-term financing is needed by March 30, 2017?

Miller Metalworks had sales in November of $60,000, in December of $40,000, and in January of $80,000. Miller collects 40% of sales in the month of the sale and 60% one month after the sale. Calculate Miller's cash receipts for January.

Which of the following is NOT a basic function of a budget?

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.

Long-term financial plans typically encompass

Amalgamated Enterprises is planning to purchase some new equipment. With this new equipment, the company expects sales to increase from $8,000,000 to $10,000,000. A portion of the financing for the purchase of the equipment will come from a $1,000,000 new common stock issue. The company knows that current assets, fixed assets, accounts payable, and accrued expenses increase in direct proportion with sales. The company's net profit margin on sales is 8%, and the company plans to pay 40% of its after-tax earnings in dividends. A copy of the company's current balance sheet is given below: Amalgamated Enterprises Balance Sheet Current assets $3,000,000 Fixed assets 12,000,000 Total assets $15,000,000 Accounts payable $4,000,000 Accrued expenses 1,000,000 Long-term debt 3,000,000 Common stock 2,000,000 Retained earnings 5,000,000 Total liabilities and net worth $15,000,000 Prepare a pro forma balance sheet for Amalgamated for next year using the percent-of-sales method and the information provided above.

Depreciation expense is a deduction from cash flow in the cash budget.

The balance sheet of the Jackson Company is presented below: Jackson Company Balance Sheet March 31, 2017 (Millions of Dollars) Current assets $12 Accounts payable $6 Fixed assets 18 Long-term debt 12 Total $30 Common equity 12 Total $30 For the year ending March 31, 2017, Jackson had sales of $35 million. The common stockholders received all net earnings of the firm in the form of cash dividends, leaving no funds from earnings available to the firm for expansion (assume that depreciation expense is just equal to the cost of replacing worn-out assets). Construct a pro forma balance sheet for March 31, 2018 for an expected level of sales of $45 million. Assume current assets and accounts payable vary as a percent of sales, and fixed assets remain at the present level. Use notes payable as a source of discretionary financing.

The function of a budget includes to

A company collects 60% of its sales during the month of the sale, 30% one month after the sale, and 10% two months after the sale. The company expects sales of $10,000 in August, $20,000 in September, $30,000 in October, and $40,000 in November. How much money is expected to be collected in October?

Which of the following will decrease discretionary funds needed?

When using the percent of sales method to construct pro forma balance sheets, assets must equal liabilities plus equity before discretionary financial needs can be projected.

Purchases of plant and equipment can be determined from the