Financial Planning And Forecasting

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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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A

dividends

B

accounts payable

C

long-term debt

D

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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A

cash

B

accounts receivable

C

accounts payable

D

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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A

static

B

dynamic

C

probabilistic

D

optimization

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Question 4
Free
Multiple Choice

Pro forma financial statements are used to:

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A

find the contribution margin

B

show the results of some assumed event

C

predict the sensitivity of different output variables

D

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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A

profit expected for a given percentage increase in sales

B

capital financing needed to promote marketing efforts

C

cash needed to finance future sales growth

D

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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A
there is a direct relationship between long-term debt and sales
B
inventories will increase proportionately with sales
C
there is a direct relationship between notes payable and sales
D
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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A
decrease notes payable
B
retire common stock
C
increase the dividend payout
D
cut dividends
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Question 8
Multiple Choice

Cash budgeting can be employed effectively by management to

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A
identify potential cash flow problems in advance
B
aid them in capital budgeting
C
control retained earnings
D
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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A
estimation of credit sales
B
estimation of the expected cash disbursements
C
scheduling of disbursements
D
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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A
deterministic
B
optimistic
C
probabilistic
D
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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A
provide the user with more useful information than other models
B
allow the user to maximize some objective function
C
allow the user to perform sensitivity analyses quickly
D
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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A
accounts payable
B
notes payable
C
accrued wages
D
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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A
actual; assumed
B
assumed; actual
C
deterministic; probabilistic
D
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.

Choose correct answer/s
A
percentage of sales forecasting method
B
pro forma statement of cash flows
C
a and b
D
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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A
Deterministic
B
Optimization
C
Probabilistic
D
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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A
$1,746,154
B
$1,446,154
C
$6,946,154
D
$ 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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A
$40,000
B
$1,600
C
$33,600
D
$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?

Choose correct answer/s
A
$317,600
B
$620,000
C
$465,600
D
$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.

Choose correct answer/s
A
$400,000
B
$358,750
C
$178,750
D
$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?

Choose correct answer/s
A
No financing needed, surplus of $139,700
B
$ 187,500
C
$ 48.800
D
$234,400
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