Exam 17: Financial Forecasting and Planning

Use the following information and the percent-of-sales method to answer the following question(s). Below is the 2004 year-end balance sheet for Banner,Inc.Sales for 2004 were $1,600,000 and are expected to be $2,000,000 during 2005.In addition,we know that Banner plans to pay $90,000 in 2005 dividends and expects projected net income of 4% of sales.(For consistency with the Answer selections provided,round your forecast percentages to two decimals. ) -Banner's projected current assets for 2005 are:

The most commonly used method for making financial forecasts is the percent-of-sales method.

Swings in discretionary financing needed can be caused by:

The "percentage" used in the percent-of-sales calculation can be obtained from:

It is common practice to develop optimistic and pessimistic scenarios when projecting financial statements.

Pro forma statements provide single point estimates of each budgeted item.

Your firm is trying to determine its cash disbursements for the next two months (June and July).In any month,the firm makes purchases of 60% of that month's sales,which are paid the following month.In addition,the firm incurs the following costs every month and pays for them in the month the expenses are incurred: wages/salaries of $10,000,rent of $4,000,and miscellaneous cash expenses of $1,000.Depreciation amortized on a monthly basis is $2,000.June's sales are expected to be $100,000,and July's sales are expected to be $150,000.Cash disbursements for the month of July are expected to be:

Long-term financial planning results in:

The ZYX Corporation is planning to request a line of credit from its bank and wants to estimate its cash needs for the month of September.The following sales forecasts have been made for 2005: Collection estimates were obtained from the credit collection department as follows: 20% collected within the month of sale;70% collected the first month following the sale;and 10% collected the second month following the sale.Payments for labor and raw materials are typically made in the month in which these costs are incurred.Total labor and raw material costs each month are 50% of sales.General administrative expenses are $30,000 per month,lease payments are $10,000 per month,and depreciation charges are $20,000 per month.The corporation tax rate is 40%;however,no corporate taxes are paid in September.Prepare a cash budget for September.

The financial planning process is the responsibility of:

Marjen Manufacturing has purchases equal to 40% of sales.They purchase one month prior to sales and pay one month after sales.Given the following sales forecast,calculate Marjen's payments for March.

Apple Two Enterprises expects to generate sales of $5,950,000 for fiscal 2002;sales were $3,450,000 in fiscal 2001.Assume the following figures for the fiscal year ending 2001: cash $70,000;accounts receivable $250,000;inventory $400,000;net fixed assets $520,000;accounts payable $235,000;and accruals $155,000.Use the percent-of-sales method to forecast accounts payable for the fiscal year ending 2002.

The percent-of-sales method can be used to forecast:

Lindsey Insurance Co.has current sales of $10 million and predicts next year's sales will grow to $14 million.Current assets are $3 million and fixed assets are $4 million.The firm's net profit margin is 7% after taxes.Presently,Lindsey has $900,000 in accounts payable,$1.1 million in long-term debt,and $5 million (including $2.5 million in retained earnings)in common equity.Next year,Lindsey projects that current assets will rise in direct proportion to the forecasted sales,and that fixed assets will rise by $500,000.Lindsey also plans to pay dividends of $400,000 to common shareholders. a.What are Lindsey's total financing needs for the upcoming year? b.Given the above information,what are Lindsey's discretionary financing needs?

The percent-of-sales method of forecasting makes which of the following assumptions?

Types of plans that businesses typically use to guide their operations include:

The first step involved in predicting financing needs is:

Short-term financial plans span a period of:

What is meant by spontaneous financing?

Which of the following is a source of external capital?