Financial Planning And Forecasting

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Questions Bank

The Role and Objective of Financial Management
The Domestic and International Financial Marketplace
Evaluation of Financial Performance
Financial Planning and Forecasting
The Time Value of Money
Fixed Income Securities: Characteristics and Valuation
Common Stock: Characteristics, Valuation, and Issuance
Analysis of Risk and Return
Capital Budgeting and Cash Flow Analysis
Capital Budgeting: Decision Criteria and Real Option Considerations
Capital Budgeting and Risk
The Cost of Capital
Capital Structure Concepts
Capital Structure Management in Practice
Dividend Policy
Working Capital Policy and Short-term Financing
The Management of Cash and Marketable Securities
Management of Accounts Receivable and Inventories
Lease and Intermediate-term Financing
Financing With Derivatives
Risk Management
International Financial Management
Corporate Restructuring
Appendix: Continuous Compounding and Discounting
Appendix: Mutually Exclusive Investments Having Unequal Lives
Appendix: Breakeven Analysis
Appendix: Bond Refunding Analysis
Appendix: Taxes

All Questions

Question 1

Free

Multiple Choice

In the percent-of-sales forecasting method, all of the following balance sheet and income statement items are assumed to increase proportionately with sales EXCEPT:

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dividends

accounts payable

long-term debt

a and c

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Question 2

Free

Multiple Choice

In the percent-of-sales forecasting method, which of the following is (are) assumed to increase proportionately with sales?

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cash

accounts receivable

accounts payable

all of the above

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Question 3

Free

Multiple Choice

Which of the following is a financial model that attempts to maximize or minimize the value of a criterion function (e.g., profits, costs)?

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static

dynamic

probabilistic

optimization

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Question 4

Free

Multiple Choice

Pro forma financial statements are used to:

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find the contribution margin

show the results of some assumed event

predict the sensitivity of different output variables

show the results of an actual event

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Question 5

Free

Multiple Choice

The percentage of sales forecasting method is used by management to forecast the amount of

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profit expected for a given percentage increase in sales

capital financing needed to promote marketing efforts

cash needed to finance future sales growth

debt financing needed

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Question 6

Multiple Choice

In using the percentage of sales forecasting method the assumption is that

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there is a direct relationship between long-term debt and sales

inventories will increase proportionately with sales

there is a direct relationship between notes payable and sales

retained earnings will increase proportionately with sales

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Question 7

Multiple Choice

To decrease the additional financing needed to support an increase in sales, management can

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decrease notes payable

retire common stock

increase the dividend payout

cut dividends

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Question 8

Multiple Choice

Cash budgeting can be employed effectively by management to

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identify potential cash flow problems in advance

aid them in capital budgeting

control retained earnings

coordinate cash and deferred expenses

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Question 9

Multiple Choice

The first step in cash budget preparation is the

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estimation of credit sales

estimation of the expected cash disbursements

scheduling of disbursements

determination of estimated receipts

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Question 10

Multiple Choice

Computerized financial planning models may be classified as any of the following except:

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deterministic

optimistic

probabilistic

none of the above

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Question 11

Multiple Choice

The main advantage of deterministic models is that they

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provide the user with more useful information than other models

allow the user to maximize some objective function

allow the user to perform sensitivity analyses quickly

allow the user to maximize or minimize some objective function

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Question 12

Multiple Choice

All the following current liabilities normally vary directly with the sales except:

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accounts payable

notes payable

accrued wages

accrued taxes

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Question 13

Multiple Choice

Pro forma financial statements show the results of some event rather than a (an) event.

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actual; assumed

assumed; actual

deterministic; probabilistic

none of the above

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Question 14

Multiple Choice

The ____ is (are) used to forecast the amount of additional financing (i.e., cash) a company will need in some future period.

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percentage of sales forecasting method

pro forma statement of cash flows

a and b

none of the above

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Question 15

Multiple Choice

____ financial planning models seek to maximize (or minimize) the value of some objective function, such as profits (or costs).

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Deterministic

Optimization

Probabilistic

none of the above

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Question 16

Multiple Choice

In 1998, Hepler Company's sales were $26 million and its total assets were $10 million. Current liabilities were $4 million and total equity was $2 million. Hepler Company's sales for 1999 are forecasted to be $34 million, earnings after taxes are expected to be 5 percent of sales and dividends of $800,000 are expected to be paid. Assuming that the ratios "assets to sales" and "current liabilities to sales" in 1998 remain the same in 1999, determine the amount of additional financing required.

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$1,746,154

$1,446,154

$6,946,154

$ 946,154

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Question 17

Multiple Choice

Peerless believes that its sales next year will increase 20 percent from the current level of $800,000. Management calculates that assets must increase $110,000 to support the new sales level, and current liabilities will increase $70,000. What total financing will be needed?

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$40,000

$1,600

$33,600

$8,000

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Question 18

Multiple Choice

ECG Monitors is forecasting that sales next year will be $8,640,000, a 20 percent increase over current sales. ECG has total assets of $3,840,000 and all assets will increase proportionately with sales. Of the current liabilities, only accounts payable (now $740,000) will increase with sales. What total financing will be needed by ECG to support the expected sales increase?

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$317,600

$620,000

$465,600

$840,400

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Question 19

Multiple Choice

ICU has current assets of $800,000 and net fixed assets of $1,400,000. The firm expects its sales to climb 25 percent next year from its current level of $3,500,000. ICU's only current liability is accounts payable of $1,200,000. If both current assets and current liabilities will increase proportionately with sales, what additional financing will be needed by ICU next year? Assume ICU has a net profit margin of 6 percent. An increase in net fixed assets of $500,000 will be required. The firm pays out 50 percent of its earnings as dividends.

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$400,000

$358,750

$178,750

$268,750

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Question 20

Multiple Choice

CU Tech expects sales next year will be $4.8 million, a 25% increase over current sales. CU has total assets of $2.24 million and all assets will increase proportionately with sales. CU has $1.49 million in current liabilities and a current ratio of 1.60 to 1. What total financing will CU need to support the expected sales increase?

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No financing needed, surplus of $139,700

$ 187,500

$ 48.800

$234,400

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Financial Planning And Forecasting

In the percent-of-sales forecasting method, all of the following balance sheet and income statement items are assumed to increase proportionately with sales EXCEPT:

In the percent-of-sales forecasting method, which of the following is (are) assumed to increase proportionately with sales?

Which of the following is a financial model that attempts to maximize or minimize the value of a criterion function (e.g., profits, costs)?

Pro forma financial statements are used to:

The percentage of sales forecasting method is used by management to forecast the amount of

In using the percentage of sales forecasting method the assumption is that

To decrease the additional financing needed to support an increase in sales, management can

Cash budgeting can be employed effectively by management to

The first step in cash budget preparation is the

Computerized financial planning models may be classified as any of the following except:

The main advantage of deterministic models is that they

All the following current liabilities normally vary directly with the sales except:

Pro forma financial statements show the results of some ____ event rather than a (an) ____ event.

The ____ is (are) used to forecast the amount of additional financing (i.e., cash) a company will need in some future period.

____ financial planning models seek to maximize (or minimize) the value of some objective function, such as profits (or costs).

Peerless believes that its sales next year will increase 20 percent from the current level of $800,000. Management calculates that assets must increase $110,000 to support the new sales level, and current liabilities will increase $70,000. What total financing will be needed?

Pro forma financial statements show the results of some event rather than a (an) event.