Exam 15: Financial Planning and Forecasting

Suppose that PBJ Industries, Inc. currently has the balance sheet shown as follows, and that sales for the year just ended were $10 million. The firm also has a profit margin of 10 percent, a retention ratio of 25 percent, and expects sales of $12 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?

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach if it is determined that 2016 is a "stale" year?

Suppose that BBM Industries, Inc. currently has the balance sheet shown as follows, and that sales for the year just ended were $2 million. The firm also has a profit margin of 5 percent, a retention ratio of 50 percent, and expects sales of $2.5 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?

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

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?

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

Suppose that Wind Em Corp. currently has the balance sheet shown as follows, and that sales for the year just ended were $15 million. The firm also has a profit margin of 23 percent, a retention ratio of 40 percent, and expects sales of $20 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 as follows. What would be the forecast for next year's sales using the naïve approach?

Suppose that Runner Industries currently has the balance sheet shown as follows, 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 are considered "chunky" or "lumpy" assets?

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

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

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

The set of assumptions underlying the firm's financial plan and the resulting projected financial statements are accordingly often referred to as which of the following?

Forecasted sales drive all of the following EXCEPT:

Which of the following statements is correct?

Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has $12 million in total assets and $500,000 in current liabilities. The firm currently pays out 25 percent of its net income to shareholders. Assume that all assets and current liabilities are expected to grow with sales. If Goldilochs does not want to rely on any external sources of funds, what is the most sales can grow (in dollars)?

Suppose that the 2017 actual and 2018 projected financial statements for Counter Corp. are initially as shown in the following tables. 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?

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

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