Question 1

The percent-of-sales method can be used to forecast

Accepted Answer

A) expenses. 
B) assets. 
C) liabilities. 
D) all of the above. 
A) expenses. 
B) assets. 
C) liabilities. 
D) all of the above. D

Question 2

Seek Limited'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.Compute cash collections for November and December.Assume that all months have 30 days.

Accepted Answer

November collections = last 50% of October + first 50% of November = .5(2,000,000)+ .5(2,500,000)= $2,250,000.
December collections = last 50% of November + first 50% of December = .5(2,500,000)+ .5(3,000,000)= $2,750,000.

Question 3

Long-term financial plans require that the firm have well-defined goals and objectives.

Accepted Answer

A) True 
 B)False  True

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Long-term financial planning results in

Accepted Answer

A) a cash budget. 
B) pro forma financial statements. 
C) a sales forecast for the next 1 to 3 years. 
D) a general narrative detailing near-term scenarios. 
A) a cash budget. 
B) pro forma financial statements. 
C) a sales forecast for the next 1 to 3 years. 
D) a general narrative detailing near-term scenarios.

Question 6

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

Accepted Answer

A) Budgets indicate the need for future short-term financing. 
B) Budgets provide the basis for corrective action when actual figures differ from the budgeted figures. 
C) Budgets compare historical costs of the firm with its current cost performance. 
D) Budgets allow for performance evaluation. 
A) Budgets indicate the need for future short-term financing. 
B) Budgets provide the basis for corrective action when actual figures differ from the budgeted figures. 
C) Budgets compare historical costs of the firm with its current cost performance. 
D) Budgets allow for performance evaluation.

Question 7

Which of the following is the correct method of determining discretionary financing needed (DFN)?

Accepted Answer

A) Projected change in assets,divided by projected change in liabilities,plus projected change in owner's equity 
B) Projected change in assets,times projected change in owner's equity,minus projected change in liabilities 
C) Projected change in owner's equity,minus projected change in liabilities,plus projected change in assets 
D) Projected change in assets,minus projected change in liabilities,minus projected change in owner's equity 
A) Projected change in assets,divided by projected change in liabilities,plus projected change in owner's equity 
B) Projected change in assets,times projected change in owner's equity,minus projected change in liabilities 
C) Projected change in owner's equity,minus projected change in liabilities,plus projected change in assets 
D) Projected change in assets,minus projected change in liabilities,minus projected change in owner's equity

Question 8

Short-term financial planning results in

Accepted Answer

A) a cash budget. 
B) pro forma financial statements. 
C) a sales forecast for the next 1 to 3 years. 
D) a general narrative detailing near-term scenarios. 
A) a cash budget. 
B) pro forma financial statements. 
C) a sales forecast for the next 1 to 3 years. 
D) a general narrative detailing near-term scenarios.

Question 9

Seek Limited'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.Compute cash collections for November and December.Assume that all months have 30 days.

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Question 2

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November collections = last 50% of October + first 50% of November = .5(2,000,000)+ .5(2,500,000)= $2,250,000.
December collections = last 50% of November + first 50% of December = .5(2,500,000)+ .5(3,000,000)= $2,750,000.

Accepted Answer

October purchases = .6(2,500,0

Question 10

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 11

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.

Accepted Answer

Parker Processed Meats,Inc.
Pro Forma In

Question 12

The financial planning process is the responsibility of

Accepted Answer

A) financial analysts. 
B) operations staff. 
C) marketing staff 
D) financial analysts,marketing staff,and operations staff interacting as a group. 
A) financial analysts. 
B) operations staff. 
C) marketing staff 
D) financial analysts,marketing staff,and operations staff interacting as a group.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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 accruals for the fiscal year ending 2014.

Accepted Answer

A) $890,001 
B) $412,316 
C) $267,319 
D) $350,814 
A) $890,001 
B) $412,316 
C) $267,319 
D) $350,814

Question 15

The first step involved in predicting financing needs is

Accepted Answer

A) projecting the firm's sales revenues and expenses over the planning period. 
B) estimating the levels of investment in current and fixed assets that are necessary to support the projected sales. 
C) determining the firm's financing needs throughout the planning period. 
D) none of the above. 
A) projecting the firm's sales revenues and expenses over the planning period. 
B) estimating the levels of investment in current and fixed assets that are necessary to support the projected sales. 
C) determining the firm's financing needs throughout the planning period. 
D) none of the above.

Question 16

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

Accepted Answer

Even when conditions are changing rapidl

Question 17

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

Accepted Answer

A) The firm operates at full capacity 
B) The firm has excess capacity 
C) The firm expects rapid growth in sales 
D) The firm increases its dividend payout ratio 
A) The firm operates at full capacity 
B) The firm has excess capacity 
C) The firm expects rapid growth in sales 
D) The firm increases its dividend payout ratio

Question 18

Assume that Zybo,Inc.has sales of $10 million and inventory of $2 million.The corporation utilises the percent-of-sales method of financial forecasting.If Zybo is expected to generate sales of $14 million next year,what will the firm's investment in inventory be?

Accepted Answer

A) $1.4 million 
B) $2.0 million 
C) $2.8 million 
D) None of the above 
A) $1.4 million 
B) $2.0 million 
C) $2.8 million 
D) None of the above

Question 19

It is common practice to develop scenarios with different rates of sales growth when projecting financial statements.

Accepted Answer

A) True 
 B)False

Question 20

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.

The percent-of-sales method can be used to forecast

Seek Limited'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.Compute cash collections for November and December.Assume that all months have 30 days.

Long-term financial plans require that the firm have well-defined goals and objectives.

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

Long-term financial planning results in

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

Which of the following is the correct method of determining discretionary financing needed (DFN)?

Short-term financial planning results in

Because financial planning usually takes place in a highly uncertain environment

The financial planning process is the responsibility of

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

The first step involved in predicting financing needs is

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

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

Assume that Zybo,Inc.has sales of $10 million and inventory of $2 million.The corporation utilises the percent-of-sales method of financial forecasting.If Zybo is expected to generate sales of $14 million next year,what will the firm's investment in inventory be?

It is common practice to develop scenarios with different rates of sales growth when projecting financial statements.

The function of a budget includes to

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

Share Valuation

Investment Decision Criteria

Analysing 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

The percent-of-sales method can be used to forecast

Seek Limited'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.Compute cash collections for November and December.Assume that all months have 30 days.

Long-term financial plans require that the firm have well-defined goals and objectives.

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

Long-term financial planning results in

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

Which of the following is the correct method of determining discretionary financing needed (DFN)?

Short-term financial planning results in

Because financial planning usually takes place in a highly uncertain environment

The financial planning process is the responsibility of

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

The first step involved in predicting financing needs is

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

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

Assume that Zybo,Inc.has sales of $10 million and inventory of $2 million.The corporation utilises the percent-of-sales method of financial forecasting.If Zybo is expected to generate sales of $14 million next year,what will the firm's investment in inventory be?

It is common practice to develop scenarios with different rates of sales growth when projecting financial statements.

The function of a budget includes to

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

Share Valuation

Investment Decision Criteria

Analysing 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