Exam 10: The Financial Plan

The indirect method of projecting cash flow uses a simple determination of cash in less cash out.

The sales budget:

______is/are a cash disbursement and _____is/are an operating expense.

_________is (are)added back to the pro forma sources and applications of funds statement because it does not represent and out-of-pocket expense. A.Inventory B.Depreciation C.Dividends D.Equipment purchases

Large positive cash flows usually occur in the first months of a new venture.

As the business grows:

An entrepreneur is trying to conduct a break-even analysis.Each product will sell for a price of $19.95.The entrepreneur has estimated the following costs: A.Rent $1000 per month B.Direct labor per unit will be $3 per unit C.Salaries will be $500 per week D.Raw materials will cost $1 per unit

The basic balance sheet relationship is:

The _____ budget is used to evaluate expenditures that will impact the business for more than one year.

Negative cash flow:

Capital budgeting and decision making is complicated and therefore use of an accountant is recommended.

For the Internet start-up,capital budgeting and operating expenses will tend to be consumed by equipment purchasing or leasing,inventory,and advertising expenses.

Costs of goods sold should be calculated using actual cost figures;using industry standard figures is too inaccurate.

The cost of goods sold expense can be determined either by directly computing the variable cost of producing a unit times the number of units sold or by using an industry standard percentage of sales.

Which of the following would be an application of funds?

______ is (are)the major source of revenue.

Which of the following would be a source of funds?

When estimating expenses for the pro format income statement,it is best to be conservative.

________ is the amount owners have invested and/or retained from the venture operations:

Identify the basic formula of a balance sheet and give an example of an item that might fall under each major component of the formula. A.Assets = liabilities + owners equity B.Assets - two categories 1.current - include cash and anything else that is expected to be converted into cash or consumed in the operation of the business during a period of one year or less.Examples: cash,inventory,accounts receivable 2.fixed - Fixed assets are those that are tangible and will be used over a long period of time.Example: equipment C.Liabilities - two categories 1.current - due within one year,example accounts payable 2.long-term - anything due over one year,example notes payable/bank loan D.Owner's Equity