Exam 17: Financial Forecasting and Planning

Based on the information in Table 3, what is Thompson's projected cumulative borrowing as of March 1, 2017?

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

Assume that Calamar Corp. has sales of $7.5 million and accounts payable of $450,000. The corporation utilizes the percent-of-sales method of financial forecasting. If Calamar is expected to generate sales of $9 million next year, what will the firm's accounts payable be?

Banner's projected retained earnings for 2018 are

The financial planning process is the responsibility of

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

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

Which of the following is NOT an element of the cash budget?

Assume that Hercules Manufacturing has sales of $25 million and current assets of $5 million. The corporation utilizes the percent-of-sales method of financial forecasting. If Hercules is expected to generate sales of $31 million next year, what will the firm's investment in current assets be?

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 2017. 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, 2017 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%

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?

Because financial planning usually takes place in a highly uncertain environment,

Based on the information in Table 1, what is Dorian's projected EBIT for March 2017?

An increase in projected ________ will increase discretionary funds needed.

Lindsey Insurance Co. has current sales of $10 million and predicts next year's sales will grow to $14 million. Current assets are $3 million and fixed assets are $4 million. The firm's net profit margin is 7% after taxes. Presently, Lindsey has $900,000 in accounts payable, $1.1 million in long-term debt, and $5 million (including $2.5 million in retained earnings) in common equity. Next year, Lindsey projects that current assets will rise in direct proportion to the forecasted sales, and that fixed assets will rise by $500,000. Lindsey also plans to pay dividends of $400,000 to common shareholders. a. What are Lindsey's total financing needs for the upcoming year? b. Given the above information, what are Lindsey's discretionary financing needs?

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

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.

The cash budget for Parker Process Meats, Inc. for the fourth quarter of 2014 is given below: Parker Process Meats, Inc. Cash Budget for the Three Months Ending December 31, 2014 Cash receipts Oct. Nov. Dec. Total collections $31,050 $4,050 $49,950 Cash disbursements: Purchases 44,550 48,600 52,650 Wages and salaries 7,425 7,425 7,425 Other expenses 2,025 1,350 675 Taxes 17,415 Total disbursements $54,000 $57,375 $78,165 The expected sales for the period are as follows: Oct.: $86,400 Nov.: $91,800 Dec.: $83,700 The total depreciation expense for the period will be $8,775. An interest payment on outstanding debt of $15,000 will be made in December. Using the information given, construct a pro forma income statement for the final quarter of 2014 for Parker.

Spontaneous sources of financing include

Which of the following assumptions is not required by the percent of sales method?