Question 1

What differentiates "discretionary financing needs" from "external financing needs"?

Accepted Answer

A)  assets 
B)  retained earnings 
C)  sales 
D)  spontaneous liabilities 
A)  assets 
B)  retained earnings 
C)  sales 
D)  spontaneous liabilities D

Question 2

The primary purpose of a cash budget is to

Accepted Answer

A)  determine the level of investment in current and fixed assets. 
B)  determine financing needs. 
C)  provide a detailed plan of future cash flows. 
D)  determine the estimated income tax for the year. 
A)  determine the level of investment in current and fixed assets. 
B)  determine financing needs. 
C)  provide a detailed plan of future cash flows. 
D)  determine the estimated income tax for the year. C

Question 3

Predicting a firm's future financial needs includes all of the following steps EXCEPT

Accepted Answer

A)  review of the firm's sales revenues and expenses over all past planning periods. 
B)  estimation of investment levels for current and fixed assets. 
C)  determination of the firm's financing needs for the period. 
D)  estimation of projected sales and expenses. 
A)  review of the firm's sales revenues and expenses over all past planning periods. 
B)  estimation of investment levels for current and fixed assets. 
C)  determination of the firm's financing needs for the period. 
D)  estimation of projected sales and expenses. A

Question 4

Is it possible for the cash budget and the pro forma income statement to have different results?

Accepted Answer

A)  yes, because revenues and expenses included in each statement are different 
B)  yes, because revenues and expenses are accounted for over different time periods 
C)  no, because they contain the same variables, while just using different formats 
D)  no, because the cash budget and the pro forma income statement provide forecasts for the same time period 
A)  yes, because revenues and expenses included in each statement are different 
B)  yes, because revenues and expenses are accounted for over different time periods 
C)  no, because they contain the same variables, while just using different formats 
D)  no, because the cash budget and the pro forma income statement provide forecasts for the same time period

Question 5

Fielding Wilderness Outfitters had projected its sales for the first six months of 2010 to be as follows:
 
Cost of goods sold is 60% of sales.Purchases are made and paid for two months prior to the sale.40% of sales are collected in the month of the sale,40% are collected in the month following the sale,and the remaining 20% in the second month following the sale.Total other cash expenses are $40,000/month.The company's cash balance as of March 1st,2010 is projected to be $40,000,and the company wants to maintain a minimum cash balance of $15,000.Excess cash will be used to retire short-term borrowing (if any exists).Fielding has no short-term borrowing as of March 1st,2010.Assume that the interest rate on short-term borrowing is 1% per month.What is Fielding's projected total receipts (collections)for April?

Accepted Answer

A)  $124,000 
B)  $180,000 
C)  -$4,000 
D)  $36,000 
A)  $124,000 
B)  $180,000 
C)  -$4,000 
D)  $36,000

Question 6

The accuracy of the percent of sales forecast method is impaired if

Accepted Answer

A)  scale economies are present for assets. 
B)  assets must be purchased in discrete quantities. 
C)  asset needs are independent of sales level. 
D)  All of the above impair the accuracy of the percent of sales forecast method. 
A)  scale economies are present for assets. 
B)  assets must be purchased in discrete quantities. 
C)  asset needs are independent of sales level. 
D)  All of the above impair the accuracy of the percent of sales forecast method.

Question 7

Matterhorn,Inc.had the following sales for the past six months.Matterhorn collects its credit sales 30% in the month of sale,60% one month after the sale,and 10% two months after the sale.
 
What are Matterhorn's total cash receipts for the month of March?

Accepted Answer

A)  $99,500 
B)  $119,000 
C)  $150,000 
D)  $154,500 
A)  $99,500 
B)  $119,000 
C)  $150,000 
D)  $154,500

Question 8

A firm's cash position would most likely be helped by

Accepted Answer

A)  delaying payment of accounts payable. 
B)  more liberal credit policies for their customers. 
C)  purchasing land for investment purposes. 
D)  holding larger inventories. 
A)  delaying payment of accounts payable. 
B)  more liberal credit policies for their customers. 
C)  purchasing land for investment purposes. 
D)  holding larger inventories.

Question 9

If external financing needed cannot be obtained due to poor market conditions,a firm could reduce the amount needed by increasing its retention ratio.

Accepted Answer

A) True 
 B)False

Question 10

Discretionary financing needed must be obtained through additional borrowing because additional equity measured by the increase in retained earnings has already been deducted.

Accepted Answer

A) True 
 B)False

Question 11

Discretionary financing needed is equal to the predicted change in total assets minus the change in retained earnings.

Accepted Answer

A) True 
 B)False

Question 12

Rawhide Outfitters had projected its sales for the first six months of 2012 to be as follows:
 
Cost of goods sold is 60% of sales.Purchases are made and paid for two months prior to the sale.40% of sales are collected in the month of the sale,40% are collected in the month following the sale,and the remaining 20% in the second month following the sale.Total other cash expenses are $40,000/month.The company's cash balance as of March 1st,2012 is projected to be $40,000,and the company wants to maintain a minimum cash balance of $15,000.Excess cash will be used to retire short-term borrowing (if any exists).The firm has no short-term borrowing as of March 1st,2012.Assume that the interest rate on short-term borrowing is 1% per month.What was Rawhides' projected loss for March?

Accepted Answer

A)  $184,000 
B)  $110,000 
C)  $84,000 
D)  none of the above 
A)  $184,000 
B)  $110,000 
C)  $84,000 
D)  none of the above

Question 13

Which of the following is the initial and most important step in the preparation of pro forma financial statements?

Accepted Answer

A)  Estimate the levels of investment in current and fixed assets. 
B)  Determine the rate of interest that will be required for borrowed funds. 
C)  Project the firm's sales revenues for the planning period. 
D)  Approximate the cost of raw materials. 
A)  Estimate the levels of investment in current and fixed assets. 
B)  Determine the rate of interest that will be required for borrowed funds. 
C)  Project the firm's sales revenues for the planning period. 
D)  Approximate the cost of raw materials.

Question 14

If the sales growth rate is greater than zero,then the discretionary financing needed will also be greater than zero.

Accepted Answer

A) True 
 B)False

Question 15

Cash budgets are completed only on an annual basis because shorter periods of time are too variable and uncertain for meaningful results.

Accepted Answer

A) True 
 B)False

Question 16

Discretionary financing needed (DFN)is equal to projected total assets minus projected total liabilities minus projected owners' equity.

Accepted Answer

A) True 
 B)False

Question 17

For a typical firm expecting higher sales,external financing needed will be greater than discretionary financing needed.

Accepted Answer

A) True 
 B)False

Question 18

All of the following will increase the discretionary financing needed EXCEPT

Accepted Answer

A)  decrease the net profit margin. 
B)  decrease the dividend payout ratio. 
C)  decrease the sales growth rate. 
D)  decrease the spontaneous financing. 
A)  decrease the net profit margin. 
B)  decrease the dividend payout ratio. 
C)  decrease the sales growth rate. 
D)  decrease the spontaneous financing.

Question 19

Discretionary sources of financing are those sources that vary automatically with a firm's level of sales.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following would NOT be found in a cash budget?

Accepted Answer

A)  interest expense 
B)  taxes 
C)  depreciation 
D)  cash sales 
A)  interest expense 
B)  taxes 
C)  depreciation 
D)  cash sales

What differentiates "discretionary financing needs" from "external financing needs"?

The primary purpose of a cash budget is to

Predicting a firm's future financial needs includes all of the following steps EXCEPT

Is it possible for the cash budget and the pro forma income statement to have different results?

The accuracy of the percent of sales forecast method is impaired if

Matterhorn,Inc.had the following sales for the past six months.Matterhorn collects its credit sales 30% in the month of sale,60% one month after the sale,and 10% two months after the sale. What are Matterhorn's total cash receipts for the month of March?

A firm's cash position would most likely be helped by

If external financing needed cannot be obtained due to poor market conditions,a firm could reduce the amount needed by increasing its retention ratio.

Discretionary financing needed must be obtained through additional borrowing because additional equity measured by the increase in retained earnings has already been deducted.

Discretionary financing needed is equal to the predicted change in total assets minus the change in retained earnings.

Which of the following is the initial and most important step in the preparation of pro forma financial statements?

If the sales growth rate is greater than zero,then the discretionary financing needed will also be greater than zero.

Cash budgets are completed only on an annual basis because shorter periods of time are too variable and uncertain for meaningful results.

Discretionary financing needed (DFN)is equal to projected total assets minus projected total liabilities minus projected owners' equity.

For a typical firm expecting higher sales,external financing needed will be greater than discretionary financing needed.

All of the following will increase the discretionary financing needed EXCEPT

Discretionary sources of financing are those sources that vary automatically with a firm's level of sales.

Which of the following would NOT be found in a cash budget?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

Filters

Exam 14: Short-Term Financial Planning

What differentiates "discretionary financing needs" from "external financing needs"?

The primary purpose of a cash budget is to

Predicting a firm's future financial needs includes all of the following steps EXCEPT

Is it possible for the cash budget and the pro forma income statement to have different results?

The accuracy of the percent of sales forecast method is impaired if

Matterhorn,Inc.had the following sales for the past six months.Matterhorn collects its credit sales 30% in the month of sale,60% one month after the sale,and 10% two months after the sale. What are Matterhorn's total cash receipts for the month of March?

A firm's cash position would most likely be helped by

If external financing needed cannot be obtained due to poor market conditions,a firm could reduce the amount needed by increasing its retention ratio.

Discretionary financing needed must be obtained through additional borrowing because additional equity measured by the increase in retained earnings has already been deducted.

Discretionary financing needed is equal to the predicted change in total assets minus the change in retained earnings.

Which of the following is the initial and most important step in the preparation of pro forma financial statements?

If the sales growth rate is greater than zero,then the discretionary financing needed will also be greater than zero.

Cash budgets are completed only on an annual basis because shorter periods of time are too variable and uncertain for meaningful results.

Discretionary financing needed (DFN)is equal to projected total assets minus projected total liabilities minus projected owners' equity.

For a typical firm expecting higher sales,external financing needed will be greater than discretionary financing needed.

All of the following will increase the discretionary financing needed EXCEPT

Discretionary sources of financing are those sources that vary automatically with a firm's level of sales.

Which of the following would NOT be found in a cash budget?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

Filters