Exam 4: Cash Flow and Financial Planning

Which of the following is a cash outflow?

An internal forecast is based on ________.

A corporation raises $500,000 in long-term debt to acquire additional plant capacity. This is considered as ________.

In cash budgeting, other cash receipts are cash receipts expected to result from sources other than sales.

Which of the following is a source of cash flows?

The primary purpose in preparing a cash budget is ________.

Which of the following would be the least likely to utilize a cash budget?

Table 4.4 Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2015, for Hennesaw Lumber, Inc. Hennesaw Lumber, Inc. estimates that its sales in 2000 will be $4,500,000. Interest expense is to remain unchanged at $105,000 and the firm plans to pay cash dividends of $150,000 during 2015. Hennesaw Lumber, Inc.'s income statement for the year ended December 31, 2014 is shown below. From your preparation of the pro forma income statement, answer the following multiple choice questions. -The pro forma accumulated retained earnings account on the balance sheet is projected to be ________. (See Table 4.4)

Table 4.5 A financial manager at General Talc Mines has gathered the financial data essential to prepare a pro forma balance sheet for cash and profit planning purposes for the coming year ended December 31, 2015. Using the percent-of-sales method and the following financial data, prepare the pro forma balance sheet in order to answer the following multiple choice questions. (a) The firm estimates sales of $1,000,000. (b) The firm maintains a cash balance of $25,000. (c) Accounts receivable represents 15 percent of sales. (d) Inventory represents 35 percent of sales. (e) A new piece of mining equipment costing $150,000 will be purchased in 2010. Total depreciation for 2010 will be $75,000. (f) Accounts payable represents 10 percent of sales. (g) There will be no change in notes payable, accruals, and common stock. (h) The firm plans to retire a long term note of $100,000. (i) Dividends of $45,000 will be paid in 2015. (j) The firm predicts a 4 percent net profit margin. Balance Sheet General Talc Mines December 31, 2014 -The pro forma net fixed assets amount is ________. (See Table 4.5)

Table 4.5 A financial manager at General Talc Mines has gathered the financial data essential to prepare a pro forma balance sheet for cash and profit planning purposes for the coming year ended December 31, 2015. Using the percent-of-sales method and the following financial data, prepare the pro forma balance sheet in order to answer the following multiple choice questions. (a) The firm estimates sales of $1,000,000. (b) The firm maintains a cash balance of $25,000. (c) Accounts receivable represents 15 percent of sales. (d) Inventory represents 35 percent of sales. (e) A new piece of mining equipment costing $150,000 will be purchased in 2010. Total depreciation for 2010 will be $75,000. (f) Accounts payable represents 10 percent of sales. (g) There will be no change in notes payable, accruals, and common stock. (h) The firm plans to retire a long term note of $100,000. (i) Dividends of $45,000 will be paid in 2015. (j) The firm predicts a 4 percent net profit margin. Balance Sheet General Talc Mines December 31, 2014 -If General Talc Mines cannot raise the external financing required through traditional credit channels, the firm may ________. (See Table 4.5)

Table 4.2 Magna Fax, Inc. Balance Sheet For the Years Ended December 31, 2014 and 2015 -The credit manager at First National Bank has just received the income statement and balance sheet for Magna Fax, Inc. for the year ended December 31,2015. (See Table 4.2.) The bank requires the firm to report its earnings performance and financial position quarterly as a condition of a loan agreement. The bank's credit manager must prepare two key financial statements based on the information sent by Magna Fax, Inc. This will be passed on to the commercial loan officer assigned to this account, so that he may review the financial condition of the firm. (a) Prepare a statement of retained earnings for the year ended December 31, 2015. (b) Prepare a summary of cash inflows and cash outflows for the year ended December 31, 2015. (c) Prepare a statement of cash flows for the year ended December 31, 2015, organized by cash flow from operating activities, cash flow from investment activities, and cash flow from financing activities.

Cash disbursements include ________.

If a firm expects short-term cash surpluses, it can plan ________.

In the statement of cash flows, the cash flows from financing activities result from debt and equity financing transactions; including incurrence and repayment of debt, cash inflow from the sale of stock, and cash outflows to repurchase stock or pay cash dividends.

Since depreciation and other noncash charges represent a scheduled write-off of an earlier cash outflow, they should not be included in the cash budget.

Net operating profit after taxes (NOPAT) represents a firm's earnings after deducting both interest and taxes.

It would be correct to define operating cash flow (OCF) as net operating profit after taxes plus depreciation.

Cash budget is a statement of a firm's planned inflows and outflows of cash that is used to estimate its long-term cash requirement.

Which of the following is a cash inflow?

A firm has prepared the coming year's pro forma balance sheet resulting in a plug figure in a preliminary statement-called the external financing required-of negative $250,000. The firm may prepare to ________.