Exam 15: Financial Planning and Forecasting

Suppose that the 2009 actual and 2010 projected financial statements for Counter Corp are initially as shown below. In these tables, sales are projected to rise 35 percent in the coming year, and the components of the income statement and balance sheet that are expected to increase at the same 35 percent rate as sales are indicated with an italics font. Assuming that Counter Corp wants to cover the AFN with 60 percent equity, 25 percent long-term debt, and the remainder from notes payable, what amount of additional funds will they need to raise if debt carries an 8 percent interest rate?

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?

Suppose that the 2009 actual and 2010 projected financial statements for Cypress Corp are initially as shown below. In these tables, sales are projected to rise 15 percent in the coming year, and the components of the income statement and balance sheet that are expected to increase at the same 15 percent rate as sales are indicated with an italics font. Assuming that Cypress Corp wants to cover the AFN with 35 percent equity, 35 percent long-term debt, and the remainder from notes payable, what amount of additional funds will they need to raise if debt carries a 9 percent interest rate?

First order effects are defined as which of the following?

Which of the following defines iterative calculation?

Suppose that the 2009 actual and 2010 projected financial statements for CMT Corp are initially as shown below. In these tables, sales are projected to rise 35 percent in the coming year, and the components of the income statement and balance sheet that are expected to increase at the same 35 percent rate as sales need to be calculated and are indicated with a blank space (___). Assuming that CMT Corp wants to cover the AFN with 30 percent equity, 35 percent long-term debt, and the remainder from notes payable, what amount of additional funds will they need to raise if debt carries a 9 percent interest rate?

What is computed by dividing the amount of assets tied directly to sales (A*) by the amount of current sales (S0)?

Suppose a firm was planning to greatly reduce its raw materials inventory next year by introducing just-in-time inventory control procedures. Assuming no other changes to the firm's operations, what would this do to AFN?

Is forecasting more important for small firms or large firms? Why?

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?

Suppose that TV Industries, Inc. currently has the balance sheet shown below, and that sales for the year just ended were $5 million. The firm also has a profit margin of 15 percent, a retention ratio of 25 percent, and expects sales of $5.5 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 to fund the expected growth?

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

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 a firm's need for additional funds?

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?

Suppose that Runner Industries currently has the balance sheet shown below, and that sales for the year just ended were $5 million. The firm also has a profit margin of 10 percent, a retention ratio of 20 percent, and expects sales of $7 million next year. If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth?

Which of the following defines MAPE?

Which statement is most correct regarding how pro forma financial statements can be used to estimate additional funds needed?

All of the following will tend to increase spontaneously with sales except _________.

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?