Exam 17: Financial Forecasting and Planning

Assume that Helaron,Inc.has sales of $83 million and fixed assets of $22.4 million.The corporation utilizes the percent-of-sales method of financial forecasting.If Helaron is expected to generate sales of $94 million next year,what will the firm's investment in fixed assets be?

What are the key questions that a strategic plan attempts to answer? How does it relate to financial plans?

Why is financial planning important in a highly uncertain financial environment.

25% of sales is collected in cash at the time of the sale,50% is collected in the month following the sale,and the remaining 25% is collected in the second month following the sale.Cost of goods sold is 75% of sales.Purchases are made in the month prior to the sale,and payments for purchases are made in the month of the sale.Total other cash expenses are $60,000/month.The company's cash balance as of February 28,2004 will be $40,000.Excess cash will be used to retire short-term borrowing (if any).Dorian has no short-term borrowing as of February 28,2004.Assume that the interest rate on short-term borrowing is 1% per month.The company must have a minimum cash balance of $25,000 at the beginning of each month.Round all answers to the nearest $100. -Based on the information in Table 1,what is Dorian Industries' total disbursement in May (not including interest on short-term borrowing)?

Short-term financial planning results in:

40% of sales is collected in the month of the sale,50% is collected in the month following the sale,and 10% is written off as uncollectible.Cost of goods sold is 70% of sales.Purchases are made the month prior to the sale 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 $50,000/month.The company's cash balance as of February 1,2004 will be $40,000.Excess cash will be used to retire short-term borrowing (if any).Thompson has no short-term borrowing as of February 28,2004.Assume that the interest rate on short-term borrowing is 1% per month.The company must have a minimum cash balance of $25,000 at the beginning of each month.Round all answers to the nearest $100. -Based on the information in Table 3,what is Thompson's projected cash balance as of April 1,2004?

The cash budget ignores discretionary financing.

Long-term financial plans typically encompass:

Broad Cloth,Inc.'s average collection period is 15 days.The vice-president of marketing has projected credit sales of $2.million for October,$2.5 million for November and $3 million for December.Purchases equal 60% of sales and are made one month in advance of budgeted sales.Payments are made 1 month after the date of purchase.Compute payments for purchases for the months of November and December.

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 accounts payable balance for 2005 is:

The preparation of pro forma financial statements accomplishes which of the following objectives?

What is the most important ingredient in developing a firm's financial plan?

All of the following are found in the cash budget EXCEPT:

40% of sales is collected in the month of the sale,50% is collected in the month following the sale,and 10% is written off as uncollectible.Cost of goods sold is 70% of sales.Purchases are made the month prior to the sale 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 $50,000/month.The company's cash balance as of February 1,2004 will be $40,000.Excess cash will be used to retire short-term borrowing (if any).Thompson has no short-term borrowing as of February 28,2004.Assume that the interest rate on short-term borrowing is 1% per month.The company must have a minimum cash balance of $25,000 at the beginning of each month.Round all answers to the nearest $100. -Based on the information in Table 3,what are Thompson's projected total receipts (collections)for March?

A sales forecast for the coming year would reflect:

Under which of the following conditions would the percent-of-sales method of financial forecasting be most accurate?

Which of the following will increase cumulative borrowing in the cash budget?

The function of a budget includes to:

Which of the following will decrease discretionary funds needed?

25% of sales is collected in cash at the time of the sale,50% is collected in the month following the sale,and the remaining 25% is collected in the second month following the sale.Cost of goods sold is 75% of sales.Purchases are made in the month prior to the sale,and payments for purchases are made in the month of the sale.Total other cash expenses are $60,000/month.The company's cash balance as of February 28,2004 will be $40,000.Excess cash will be used to retire short-term borrowing (if any).Dorian has no short-term borrowing as of February 28,2004.Assume that the interest rate on short-term borrowing is 1% per month.The company must have a minimum cash balance of $25,000 at the beginning of each month.Round all answers to the nearest $100. -Based on the information in Table 1,what is Dorian's projected EBIT for March 2004?