Exam 4: Cash Flow and Financial Planning

Cash planning involves the preparation of a firm's cash budget. Without adequate cash-regardless of the level of profits-any firm could fail.

The key outputs of the short-term financial planning process are the ________.

Table 4.1 True Sandpaper Co. Balance Sheets For the Years Ended 2014 and 2015 -The depreciation expense for 2015 is ________. (See Table 4.1)

Table 4.3 The financial analyst for Sportif, Inc. has compiled sales and disbursement estimates for the coming months of January through May. Historically, 75 percent of sales are for cash with the remaining 25 percent collected in the following month. The ending cash balance in January is $3,000. -The total cash receipts for April are ________. (See Table 4.3)

The percent-of-sales method to prepare a pro forma income statement assumes a firm has no fixed costs. Therefore, the use of the past cost and expense ratios generally tends to ________ profits when sales are increasing.

Allocation of the historic costs of fixed assets against the annual revenue they generate is called ________.

Free cash flow (FCF) is the cash flow a firm generates from its normal operations; calculated as EBIT minus taxes plus depreciation.

________ is a noncash charge.

The cash flows from operating activities section of the statement of cash flows includes ________.

One basic weakness of the simplified pro forma approaches lies in the assumption that the firm's past financial condition is an accurate indicator of its future.

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 $230,000. The firm should prepare to ________.

A firm has just ended the calendar year making a sale in the amount of $200,000 of merchandise purchased during the year at a total cost of $150,500. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. One possible problem this firm may face is ________.

Darling Paper Container, Inc. purchased several machines at a total cost of $300,000. The installation cost for this equipment was $25,000. The firm plans to depreciate the equipment using the MACRS 5-year normal recovery period. Prepare a depreciation schedule showing the depreciation expense for each year.

Given a financial manager's preference for faster receipt of cash flows, a longer depreciable life is preferred to a shorter one.

A firm's free cash flow (FCF) represents the amount of cash flow available to investors (stockholders and bondholders) after the firm has met all operating needs and after having paid for net fixed asset investments and net current asset investments.

Table 4.1 True Sandpaper Co. Balance Sheets For the Years Ended 2014 and 2015 -The firm ________ fixed assets worth ________. (See Table 4.1)

Depreciation deductions, like any other business expenses, reduce the income that a firm reports on its income statement.

In the statement of cash flows, cash flows from operating activities are cash flows directly related to purchase and sale of fixed assets.

An external sales forecast is based on ________.

Calculate the change in the key balance sheet accounts between 2014 and 2015 and classify each as a source (S), a use (U), or neither (N), and indicate which type of cash flow it is: an operating cash flow (O), and investment cash flow (I) or a financing cash flow (F). ABC Corp. Balance Sheet Changes and Classification of Key Accounts between 2014 and 2015