Exam 10: Forecasting Financial Statements

Card Sharks,Inc. Card Sharks,Inc.sells baseball cards and other memorabilia.The company tries to maintain a cash balance equivalent to approximately 30 days of sales.Sales in 2011 amounted to $352,412 and the company expects growth in 2012 of 33% and in 2013 of 40%. Given the information provided about Card Sharks,what is the company's 2013 projected cash balance?

As a firm progresses through the growth life-cycle stage,what type of flexible account will it be more likely to use to balance the balance sheet?

The analyst can capture projected levels of operating activity by using ______________________________ to develop forecasts for individual assets.

Office Mart,Inc.sells numerous office supply products through a national distribution center.The company has focused on maintaining a cash balance equivalent to approximately 14 days of sales.Sales in 2010 amounted to $125,980,673 and the company expects growth in 2011 of 11% and in 2012 of 15%.Given this information determine Office Mart,Inc.'s projected year-end cash balance for 2011 and 2012.

When projecting operating expenses it is important to determine the mix of fixed and variable costs,one clue suggesting the presence of fixed costs is

Repair Specialists is a leading retailer of home improvement products.It operates large warehouse-style stores.Despite declining sales and difficult economic conditions in 2009 and 2010,Repair Specialists continued to invest in new stores.The following table provides summary data for Repair Specialists. Required a.Use the preceding data for Repair Specialists to compute average revenues per store, capital spending per new store,and ending inventory per store in 2010. b.Assume that Repair Specialists will add 100 new stores by the end of Year 1.Use the data from 2010 to project Year 1 sales revenues,capital spending,and ending inventory.Assume that each new store will be open for business for an average of one-half year in Year 1.For simplicity,assume that in Year 1,Repair Specialists' sales revenues will grow,but only because it will open new stores.

If a firm competes in a capital-intensive industry with excess capacity,all of the following are true except:

Firms which have differentiated ___________________________________ for its products may have a greater potential to increase prices.

All of the following are true regarding the key principles of forecasting except:

Financial ratio,percentage,and trend comparisons can be distorted by all of the following except:

Realistic expectations are ____________________ and ____________________.

Projecting sales price changes depends on factors specific to the firm and its industry that might affect demand and price elasticity.Which of the following types of companies would most likely be able to increase prices?

Saunders Corporation manufactures consumer electronics products.Selected income statement data for 2009 and 2010 follow (amounts in millions of dollars): Required a.The analyst can sometimes estimate the variable cost as a percentage of sales for a particular cost (for example,cost of goods sold)by dividing the amount of the change in the cost item between two years by the amount of the change in sales for those two years.The analyst can then multiply total sales by the variable-cost percentage to determine the total variable cost.Subtracting the variable cost from the total cost yields the fixed cost component for that particular cost item.Follow this procedure to determine the cost structure (fixed cost plus variable cost as a percentage of sales)for cost of goods sold for Saunders. b.Repeat requirement a.for selling and administrative expenses. c.Saunders Corporation discloses that it expects sales to grow at the following percentages in future years: Year 1,12 percent; Year 2,10 percent; Year 3,8 percent; Year 4,6 percent.Project sales,cost of goods sold,selling and administrative expenses,and operating income before income taxes for Saunders for Year 1 to Year 4 using the cost structure amounts derived in requirements a.and b. d.Compute the ratio of operating income before income taxes to sales for Year 1 through Year 4. e.Interpret the changes in the ratio computed in requirement d.in light of the expected changes in sales.

Financial statement forecasts rely on additivity within financial statements and articulation across financial statements.Given this information forecasts of future growth in inventory will most likely affect growth in

The authors set forth a seven-step forecasting game plan for preparing pro forma financial statements.Discuss the seven steps necessary to prepare the three principal financial statements.

For some types of assets,such as accounts receivable,asset growth typically ____________________ future sales growth.

Common-size financial statements recast each statement item as

An analyst using the inventory turnover ratio to calculate future levels of inventory may face the problem that

Financial statement forecasts rely on additivity within financial statements and articulation across financial statements.Given this information sales growth forecasts will most likely affect growth in

All of the following are the fundamental bases for future payoffs to equity shareholders and share value except: