Exam 4: Financial Planning and Forecasting

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

____ is the statistical technique that helps the analyst classify observations (firms) into two or more predetermined groups based on certain characteristics of the observation.

The value of debt and equity securities is based upon:

The category "Cash and Cash Equivalents" includes short term investments. The time frame for short-term is:

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

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

An example of an investing activity is:

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

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:

The first step in the preparation of a cash budget is:

What information does a long-term financial plan offer?

Explain the cash flow generation process:

Jones Company sales last year were $25 million and its total assets were $8 million. Accounts payable were $2 million and common stock and retained earnings were $5 million. Jones sales are forecasted to be $30 million this year, earnings after tax are expected to be 3% of sales, and dividends of $250,000 are expected to be paid. Assuming that the ratio of assets to sales and current liabilities to sales remain the same this year as last year, determine the amount of additional financing required.

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?

A good operational plan incorporates a plan for:

In preparing a statement of cash flows, the ____ method involves adjusting net income to reconcile it to net cash flows from operating activities.

The Hudson River Line Company has a balance sheet as of the end of the year as follows: Last year, the firm had sales of $148,750. This year the company expects sales to increase 25%, to generate earnings after tax of $16,000, and to pay a dividend of $5,000. Hudson operated its fixed assets at 85% capacity last year. What additional financing will be needed to support the sales increase?

The main advantage of deterministic models is that they

The Financial Accounting Standard Board (FASB) requires companies to prepare their statement of cash flows using the:

Strategic planning for a firm deals with which of the following items? I. The overall direction of the firm. II. Marketing and production needs.