Exam 3: Financial Planning and Pro Forma Financial Statements

Trekker Trash and Recycling is expected to have receivables of $1,234,000 in January, $989,700 in February and $1,020,000 in March. The company's pattern of cash collections is 60% in the month following the sale, and 40% in the month after that. How much will Trekker collect from its receivables in March?

A business can purchase Machine "A" for $70,000. Cost per unit output would be $15. It could purchase Machine "B" for $127,000. Cost per unit would be $12. Both machines are depreciated on a straight-line basis over 10 years. The product retails for $20 and sells 40,000 units. If sales are expected to increase by 15% next year, which machine is the better financial choice?

Repayment of a mortgage is

Timmy's Toys expects to make purchases of $181,775. It anticipates an opening inventory of $65,225 and closing inventory of $19,000. If its Sales Revenue is $365,030, what will the Company's cost of goods sold be?

Top Printing Company has credit sales of $500,000 in June, $700,000 in July, $850,000 in August, and $500,000 in September. It collects 50% of its credit sales in the month following the sale and 25% in each of the months thereafter. What is Top Printing's cash collection in September?

In September, Sales Revenue for a company totaled $660,000 of which 40% was collected. The Company issued 50,000 preferred shares at $45 each. A down payment of $1,125,000 was proposed on the purchase of a building and electronic equipment to be operational by year-end. Salary expense in September, totaled $250,000 of which 10% were accrued. Three months of rent were prepaid for a total of $156,000. August's expenses were paid. $150,000 of corporate taxes was deferred to the next quarter. Accounts Receivable was reduced by $360,000. The credit line of $120,000 was paid off at the beginning of the month, saving $986 of interest for the period. Amortization expense totaled $40,000. In September

When Jacob Jawad had completed Spiro Tech's pro forma cash flow, he noticed a cash deficit for three months of the year, which, he perceived, was due to poor inventory planning. He adjusted the date of selected purchase orders on his electronic spreadsheet until he was satisfied that the deficits were eliminated or minimized in the target months. And Jawad was performing

Which of the following best describes the contribution margin?

The Perimeter Security Company has completed a pro forma cash flow projection that indicates a weakening cash position over the next two years. Which of the following actions would further worsen Perimeter's cash position over time?

The disadvantage in holding cash balances, is that cash

The Block Defender video game sells for $50 and costs $10 to manufacture. Fixed costs were $5,000,000. Which of the following statements is correct?

The breakeven chart for Denim Inc.'s new Wholly Bluejean line shows the net income line intersecting the zero line at 250,000 units. At this number of units, the total cost line reads $80,000,000 and the sales line reads $90,000,000. The jeans are expected to sell for $250. What conclusion can be drawn from this information?

If customers pay their invoices on average in 30 days and the company is projecting a 12% increase in its sales revenue next year from its current level of $5,657,500, how much more will it be carrying in accounts receivable next year?

Primrose Ltd. is considering a new issue of common shares to implement a share for share exchange to acquire 100% ownership of Avalanche Industries. Primrose has 5 million shares outstanding and Avalanche has 2,500,000 shares outstanding. Primrose's net income after tax is $50 million. Avalanche industries has a net income after tax of $8 million. The merger will result in

The advantage of the Percent of Sales Method of creating pro forma statements is in its ability to

Catarpillar Ltd. and Butterfly Inc. have operating leverages of 40% and 50% respectively. Which of the following statements is most likely to be true?

A caterer has 20% cash sales. Half of the credit sales are paid by customers with credit cards and is reimbursed by the financial institutions in the month following the sale after first deducting a fee of 2 percent of gross credit card sales. The rest is invoiced with an equal amount collected in each of three months starting the month after the sales, net of 1.5% loss due to bad debts. If the caterer has sales of $48,000 in May, her first month of business, and $53,000 in June, how much cash will she receive in June?

An increase in accumulated depreciation is

Sales for RAJ Inc. from March to June were $190,000, $200,000, $323,000 and $340,000, respectively. 10% are cash sales and 80% of the invoices are paid the next month, and the rest the month after that. RAJ Inc.'s operating expenses for March through June are $165,000, $185,000, $270,000 and $285,000, respectively, of which salaries and rent, comprising $100,000 are paid immediately, and the rest are paid in the next month. If RAJ had a cash shortfall of $50,000 at the end of April, what is RAJ Inc.'s net cash balance at the end of June?

Mandrake Manufacturing had sales revenue for the second quarter of $936,000. Cost of Goods Sold was $520,000. The company is expecting a manufacturing cost increase of 5%. It is increasing its average selling price from $180 this year to $195 next year and expecting a sales volume decrease of 5%. What is the company's projected gross profit for the coming year?