Exam 15: Financial Planning and Forecasting

Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has $10.5 million in total assets. The firm's chief financial officer is projecting a 25% increase in sales. The firm has $1.25 million in accounts payable and $1,500,000 in long-term debt (bonds). The firm currently pays out 20% of its net income to shareholders. Assuming that all assets and spontaneous liabilities are expected to grow with sales, how much in additional funds will Goldilochs need from external sources to fund the expected growth?

Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has $10.5 million in total assets. The firm's chief financial officer is projecting a 20% increase in sales. If the firm's sales do increase by 20%, it is expected that spontaneous liabilities will increase by $500,000. The firm currently pays out 30% of its net income to shareholders. Assuming that all assets are expected to grow with sales, how much in additional funds will Goldilochs need from external sources to fund the expected growth?

Suppose a firm has had the historical sales figures shown below. What would be the forecast for next year's sales using regression to estimate a trend?

Which of the following is a set of financial statements depicting an operating division of a firm's expected financial situation in the foreseeable future under the most reasonable set of assumptions concerning relevant factors?

Suppose that Wind Em Corp. currently has the balance sheet shown below, and that sales for the year just ended were $12 million. The firm also has a profit margin of 20 percent, a retention ratio of 30 percent, and expects sales of $22 million next year. If all assets and current liabilities are expected to grow with sales, what is the necessary increase in assets?

Suppose a firm has had the historical sales figures shown below. What would be the forecast for next year's sales using the naïve approach?

Forecasted sales drives all of the following except:

Goldilochs Inc. reported sales of $8 million and net income of $2 million. The firm has a total asset turnover of 1.2. The firm's chief financial officer is projecting a $6 million increase in sales and that spontaneous liabilities will increase by $1 million automatically. The firm currently pays out 50% of its net income to shareholders. Assuming that all assets and current liabilities are expected to grow with sales, how much in additional funds will Goldilochs need from external sources to fund the expected growth?

The financial plan is an important element in the process of strategic planning. What does strategic planning involve?

Suppose that Team Industries, Inc. currently has the balance sheet shown below, and that sales for the year just ended were $3 million. The firm also has a profit margin of 20 percent, a retention ratio of 30 percent, and expects sales of $6 million next year. If all assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources?

Which of the following will decrease the additional funds needed from external sources?

Which of the following statements is correct?

Which of the following is used to remove the effects of seasonality from historic data?

Suppose a firm has had the historical sales figures shown below. What would be the forecast for next year's sales using the average approach?

Which of the following defines the term deseasonalize?

Suppose a firm has had the historical sales figures shown below. What would be the forecast for next year's sales using the average approach if it was determined that years 2004 and 2005 were "stale"?

Which of the following will increase the additional funds needed from external sources?

Abracadabra Inc. has total assets of $106,000 and a debt ratio of 40%. If last year's sales were $145,000 and sales are expected to grow 10% in the future, what is Abracadabra's capital intensity ratio?

Suppose a firm has had the historical sales figures shown below. What would be the forecast for next year's sales using the naïve approach?

Which of the following will increase the additional funds needed from external sources?