Question 1

All of the following are found in the cash budget EXCEPT

Accepted Answer

A) a net change in cash for the period. 
B) accounts receivable. 
C) cash disbursements. 
D) new financing needed. 
A) a net change in cash for the period. 
B) accounts receivable. 
C) cash disbursements. 
D) new financing needed.

Question 2

Potential sources of financing to support an increase in sales include all of the following EXCEPT

Accepted Answer

A) increase in the dividend payout ratio. 
B) increase in spontaneous liabilities. 
C) increase in accounts payable. 
D) issuance of bonds and/or common stock. 
A) increase in the dividend payout ratio. 
B) increase in spontaneous liabilities. 
C) increase in accounts payable. 
D) issuance of bonds and/or common stock.

Question 3

The cash budget can be used to provide an estimate of the firm's future financing needs.

Accepted Answer

A) True 
 B)False

Question 4

Rawhide Outfitters had projected its sales for the first six months of 2012 to be as follows:   Cost of goods sold is 60% of sales.Purchases are made and paid for two months prior to the sale.40% of sales are collected in the month of the sale,40% are collected in the month following the sale,and the remaining 20% in the second month following the sale.Total other cash expenses are $40,000/month.The company's cash balance as of March 1st,2012 is projected to be $40,000,and the company wants to maintain a minimum cash balance of $15,000.Excess cash will be used to retire short-term borrowing (if any exists).Fielding has no short-term borrowing as of March 1st,2012.Assume that the interest rate on short-term borrowing is 1% per month.How much short term financing is needed by March 30,2012?

Accepted Answer

A) $110,000 
B) $15,000 
C) $70,000 
D) $85,000 
A) $110,000 
B) $15,000 
C) $70,000 
D) $85,000

Question 5

The balance sheet for the Long Drive Golf Company on September 30,2010 is presented below: Long Drive Golf Company Balance Sheet September 30,2010   The treasurer of the firm wants to issue $1,200,000 in long-term bonds to be used as follows: 1.$240,000 to reduce accounts payable 2.$192,000 to retire notes payable 3.$128,000 to increase cash on hand 4.$640,000 to increase inventories a.Assuming that the loan is obtained,construct a pro forma balance sheet for December 31,2010,for Long Drive Golf Company that reflects the use of the funds provided. b.Was the liquidity of Long Drive Golf Company improved by the loan?

Accepted Answer

Long Drive Golf Co.

Question 6

Discretionary sources of financing are those sources that vary automatically with a firm's level of sales.

Accepted Answer

A) True 
 B)False

Question 7

All of the following will increase the discretionary financing needed EXCEPT

Accepted Answer

A) decrease the net profit margin. 
B) decrease the dividend payout ratio. 
C) decrease the sales growth rate. 
D) decrease the spontaneous financing. 
A) decrease the net profit margin. 
B) decrease the dividend payout ratio. 
C) decrease the sales growth rate. 
D) decrease the spontaneous financing.

Question 8

Which of the following is a limitation of the "percent of sales method" of preparing pro forma financial statements?

Accepted Answer

A) A firm's investment in accounts receivable is seldom related to sales volume. 
B) Not all assets and liabilities increase or decrease as a constant percent of sales. 
C) Inventory levels are seldom affected by changes in sales volume. 
D) The dividend payout ratio may change from one year to the next. 
A) A firm's investment in accounts receivable is seldom related to sales volume. 
B) Not all assets and liabilities increase or decrease as a constant percent of sales. 
C) Inventory levels are seldom affected by changes in sales volume. 
D) The dividend payout ratio may change from one year to the next.

Question 9

Predicting a firm's future financial needs includes all of the following steps EXCEPT

Accepted Answer

A) review of the firm's sales revenues and expenses over all past planning periods. 
B) estimation of investment levels for current and fixed assets. 
C) determination of the firm's financing needs for the period. 
D) estimation of projected sales and expenses. 
A) review of the firm's sales revenues and expenses over all past planning periods. 
B) estimation of investment levels for current and fixed assets. 
C) determination of the firm's financing needs for the period. 
D) estimation of projected sales and expenses.

Question 10

LPD Logistics,Inc.'s projected sales for the first six months of 2010 are given below.   20% of sales are collected in the month of the sale,75% are collected in the month following the sale,and 5% are written off as uncollectible.Cost of goods sold is 80% of sales.Purchases are made the month prior to the sales and are paid during the month the purchases are made (i.e.goods sold in March are bought and paid for in February).Total other cash expenses are $35,000/month.The company's cash balance as of February 1,2010 will be $30,000.Excess cash will be used to retire short-term borrowing (if any).LPD has no short term borrowing as of February 28,2010.Assume that the interest rate on short-term borrowing is 1% per month.The company must have a minimum cash balance of $20,000 at the beginning of each month.What is LPD's projected total receipts (collections)for March?

Accepted Answer

A) $357,500 
B) $310,000 
C) $456,000 
D) $475,000 
A) $357,500 
B) $310,000 
C) $456,000 
D) $475,000

Question 11

CraftCo,Inc.' projected sales for the first six months of 2012 are given below:   40% of sales are collected in cash at time of sale,50% are collected in the month following the sale,and the remaining 10% are collected in the second month following the sale.Cost of goods sold is 60% of sales.Purchases are made in the month prior to the sales,and payments for purchases are made in the month of the sale.Total other cash expenses are $40,000/month.The company's cash balance as of February 28,2012 will be $25,000.Excess cash will be used to retire short-term borrowing (if any).CraftCo,Inc.has no short term borrowing as of February 28,2012.Assume that the interest rate on short-term borrowing is 1% per month.The company must have a minimum cash balance of $15,000 at the beginning of each month.What is CraftCo,Inc.' total cash receipts for April 2010?

Accepted Answer

A) $460,000 
B) $490,000 
C) $524,000 
D) $560,000 
A) $460,000 
B) $490,000 
C) $524,000 
D) $560,000

Question 12

The percent of sales method does not accurately estimate the balances for lumpy assets.Which of the following statements best describes the possible errors?

Accepted Answer

A) If excess capacity exists,the percent of sales method will overestimate asset requirements. 
B) The percent of sales method consistently underestimates the forecasted balances of lumpy assets. 
C) The percent of sales method consistently overestimates the forecasted balances of lumpy assets. 
D) If fixed assets are utilized at full capacity currently,the percent of sales method will underestimate the forecasted fixed asset balance. 
A) If excess capacity exists,the percent of sales method will overestimate asset requirements. 
B) The percent of sales method consistently underestimates the forecasted balances of lumpy assets. 
C) The percent of sales method consistently overestimates the forecasted balances of lumpy assets. 
D) If fixed assets are utilized at full capacity currently,the percent of sales method will underestimate the forecasted fixed asset balance.

Question 13

The term "lumpy asset" means

Accepted Answer

A) the same thing as assets that exhibit scale economies. 
B) assets that can be purchased in incremental units. 
C) assets that have economies of scale but not economies of scope. 
D) assets that must be purchased in discrete quantities. 
A) the same thing as assets that exhibit scale economies. 
B) assets that can be purchased in incremental units. 
C) assets that have economies of scale but not economies of scope. 
D) assets that must be purchased in discrete quantities.

Question 14

The percent of sales method does not provide a reasonable prediction of asset levels for instances when there are economies of scale in the use of the asset being forecast and when asset purchases are lumpy.

Accepted Answer

A) True 
 B)False

Question 15

Plato Industries' projected sales for the first six months of 2012 are given below:   20% of sales are collected in cash at time of sale,50% are collected in the month following the sale,and the remaining 30% are collected in the second month following the sale.Cost of goods sold is 85% of sales.Purchases are made in the month prior to the sales,and payments for purchases are made in the month of the sale.Total other cash expenses are $70,000/month.The company's cash balance as of February 28,2012 will be $10,000.Excess cash will be used to retire short-term borrowing (if any).Plato has no short term borrowing as of February 28,2012.Ignore any interest on short-term borrowing.The company must have a minimum cash balance of $40,000 at the beginning of each month.Plato's projected EBIT for March 2012?

Accepted Answer

A) $42,000 
B) $23,000 
C) ($28,000) 
D) ($60,000) 
A) $42,000 
B) $23,000 
C) ($28,000) 
D) ($60,000)

Question 16

CraftCo,Inc.'s projected sales for the first six months of 2012 are given below:   40% of sales are collected in cash at time of sale,50% are collected in the month following the sale,and the remaining 10% are collected in the second month following the sale.Cost of goods sold is 60% of sales.Purchases are made in the month prior to the sales,and payments for purchases are made in the month of the sale.Total other cash expenses are $40,000/month.The company's cash balance as of February 28,2012 will be $25,000.Excess cash will be used to retire short-term borrowing (if any).CraftCo,Inc.has no short term borrowing as of February 28,2012 Assume that the interest rate on short-term borrowing is 1% per month.The company must have a minimum cash balance of $15,000 at the beginning of each month.What is CraftCo,Inc.'s total cash disbursements for April 2012?

Accepted Answer

A) $294,000 
B) $334,000 
C) $374,000 
D) $414,000 
A) $294,000 
B) $334,000 
C) $374,000 
D) $414,000

Question 17

Discretionary financing needs will be higher if ________.Assume "all else equal."

Accepted Answer

A) the firm's net profit margin increases 
B) sales decline 
C) the dividend payout ratio is raised 
D) excess capacity exists for fixed assets 
A) the firm's net profit margin increases 
B) sales decline 
C) the dividend payout ratio is raised 
D) excess capacity exists for fixed assets

Question 18

Matterhorn,Inc.had the following sales for the past six months.Matterhorn collects its credit sales 30% in the month of sale,60% one month after the sale,and 10% two months after the sale.   What are Matterhorn's total cash receipts for the month of June?

Accepted Answer

A) $120,400 
B) $147,000 
C) $195,400 
D) $213,000 
A) $120,400 
B) $147,000 
C) $195,400 
D) $213,000

Question 19

Plato Industries' projected sales for the first six months of 2012 are given below:   20% of sales are collected in cash at time of sale,50% are collected in the month following the sale,and the remaining 30% are collected in the second month following the sale.Cost of goods sold is 85% of sales.Purchases are made in the month prior to the sales,and payments for purchases are made in the month of the sale.Total other cash expenses are $70,000/month.The company's cash balance as of February 28,2012 will be $10,000.Excess cash will be used to retire short-term borrowing (if any).Plato has no short term borrowing as of February 28,2012.Ignore any interest on short-term borrowing.The company must have a minimum cash balance of $40,000 at the beginning of each month.What is Plato Industries' total disbursement in May?

Accepted Answer

A) $367,500 
B) $348,000 
C) $425,500 
D) $324,000 
A) $367,500 
B) $348,000 
C) $425,500 
D) $324,000

Question 20

Use the "percent of sales method" of preparing pro forma financial statements to determine the projection for next year's cost of goods sold.Make the following assumptions: current year's sales are $27,800,000; current year's cost of goods sold is $17,528,000; sales are expected to rise by 30%.What is the projection for next year's cost of goods sold?

Accepted Answer

A) $20,481,000 
B) $21,138,900 
C) $21,459,200 
D) $22,786,400 
A) $20,481,000 
B) $21,138,900 
C) $21,459,200 
D) $22,786,400

All of the following are found in the cash budget EXCEPT

Potential sources of financing to support an increase in sales include all of the following EXCEPT

The cash budget can be used to provide an estimate of the firm's future financing needs.

Discretionary sources of financing are those sources that vary automatically with a firm's level of sales.

All of the following will increase the discretionary financing needed EXCEPT

Which of the following is a limitation of the "percent of sales method" of preparing pro forma financial statements?

Predicting a firm's future financial needs includes all of the following steps EXCEPT

The percent of sales method does not accurately estimate the balances for lumpy assets.Which of the following statements best describes the possible errors?

The term "lumpy asset" means

The percent of sales method does not provide a reasonable prediction of asset levels for instances when there are economies of scale in the use of the asset being forecast and when asset purchases are lumpy.

Discretionary financing needs will be higher if ________.Assume "all else equal."

Matterhorn,Inc.had the following sales for the past six months.Matterhorn collects its credit sales 30% in the month of sale,60% one month after the sale,and 10% two months after the sale. What are Matterhorn's total cash receipts for the month of June?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

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Exam 14: Short-Term Financial Planning

All of the following are found in the cash budget EXCEPT

Potential sources of financing to support an increase in sales include all of the following EXCEPT

The cash budget can be used to provide an estimate of the firm's future financing needs.

Discretionary sources of financing are those sources that vary automatically with a firm's level of sales.

All of the following will increase the discretionary financing needed EXCEPT

Which of the following is a limitation of the "percent of sales method" of preparing pro forma financial statements?

Predicting a firm's future financial needs includes all of the following steps EXCEPT

The percent of sales method does not accurately estimate the balances for lumpy assets.Which of the following statements best describes the possible errors?

The term "lumpy asset" means

The percent of sales method does not provide a reasonable prediction of asset levels for instances when there are economies of scale in the use of the asset being forecast and when asset purchases are lumpy.

Discretionary financing needs will be higher if ________.Assume "all else equal."

Matterhorn,Inc.had the following sales for the past six months.Matterhorn collects its credit sales 30% in the month of sale,60% one month after the sale,and 10% two months after the sale. What are Matterhorn's total cash receipts for the month of June?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

Filters