Exam 10: Forecasting Financial Statements

It may be difficult to forecast sales for firms with _________________________ patterns because their historical growth rates reflect wide variations in both direction and amount from year to year.

A firm in transition from the high growth to the mature phase of its life cycle,or a firm with significant technological improvements in its production processes,might expect increases in ______________________________ but decreases in sales prices per unit.

Financial statement forecasts should rely on ____________________ within financial statements.

The following balance sheet and income statement pertain to Goode Corp.,using the following assumptions complete a forecasted 2013 income statement: Assumptions far 2013: Revenue growth rate 45\% COGS 70\% of sales Operating expenses 18\% of sales Interest expense 12\% of begining lang-term debt Tax rate 35\% Goode corp. Consolidated Statement of Income (Thousands except per share amounts) Net Revenues Cost of Revenue SG\&A Operating Income Interest Expense Income Before Income Taxes Income taxes Net Income Goode Corp Consolidated Balance Sheet (Thousands) Current Assets Cash and Equivalents Merchandise inventory Accounts receivable PPE (including intangibles), net Total Assets Liabilities and Stockholders' Equity Accounts payable Long-term debt Shareholders' Equity Common stock and APIC Retained earnings Total Liabilities and Shareholders' Eq. 2012 \ 345,871 (226,546) 36,316 35,832 2012 7,905 6,308 6,614 9,643 13,500 28,613

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?

One problem caused by using turnover ratios to calculate asset balances is that it can lead to volatility in projected ending balances.What might an analyst do to reduce the "sawtooth" pattern caused by using turnover ratios?

Realistic expectations are ____________________ and ____________________.

Using common-size balance sheet percentages to project individual assets,liabilities,or shareholders' equity has all of the following shortcomings except:

In comparison of 2010 to 2009 performance,Watson Company's inventory turnover decreased substantially,although sales and inventory amounts were essentially unchanged. Required: During a corporate meeting you heard the following managers postulate why the decreased inventory turnover ratio happened.Which statement best explains the decreased inventory turnover ratio and why? a.The marketing manager said: The decreased inventory turnover ratio is due to an increase in the cost of goods sold. b.The operations manager said: The decreased inventory turnover ratio is due to increased gross profit percentage. c.The credit manager said: The decreased inventory turnover ratio is due to a decrease in the accounts receivable turnover. d.The shipping manager said: The decreased inventory turnover ratio is due to inventory being shipped FOB destination point that keeps those items in inventory until they reach the purchasers warehouse.

A firm in a mature industry with little expected change in its market share might anticipate volume increases equal to the growth rate in the _________________________ within its geographic markets.

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

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 30% and in 2013 of 35%. -All of the following are the fundamental bases for future payoffs to equity shareholders and share value except:

Nichols and Wahlen's 2004 study showed that superior forecasting provides the potential to earn superior security returns.Nichols and Wahlen's findings indicate:

Financial statement forecasts are important analysis tools because forecasts of ______________________________ play a central role in valuation and many other financial decision contexts.

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:

Sparky's Sparky's sells auto parts.Provided below is selected financial information from the company's 2012 annual report: Fiscalyear end 2012 2011 (amounts in thousands of dollars) Net sales \ 125,410 \ 106,380 Cast of Goods Sold -104,090 -89,355 Grass Prafit \ 21,320 \ 17,021 Irventory \ 31,353 \ 30,850 -Sparky's forecasts that sales will grow by 25% in 2013 and that its cost of goods sold to sales ratio will be the same in 2013 as it was in 2012.If these assumptions prove correct and Sparky's inventory turnover ratio for 2013 is 4.5 what will be the level of inventory at the end of 2013?

In developing forecasts of expenses the analyst must take into consideration that expenses can be broken down into ________________________ or ______________________ components.

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

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 30% and in 2013 of 35%. -Given the information provided about Card Sharks,what is the company's 2012 projected year-end cash balance?

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