Exam 17: Financial Forecasting and Planning

A company collects 60% of its sales during the month of the sale,30% one month after the sale,and 10% two months after the sale.The company expects sales of $10,000 in August,$20,000 in September,$30,000 in October,and $40,000 in November.How much money is expected to be collected in October?

Which of the following statements about the percent-of-sales method of financial forecasting is true?

Which of the following is a spontaneous source of financing?

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 fixed assets for 2005 are:

The cash budget for Parker Process Meats,Inc.for the fourth quarter of 2004 is given below: Parker Process Meats,Inc. The expected sales for the period are as follows: Oct.: $86,400 Nov.: $91,800 Dec.: $83,700 The total depreciation expense for the period will be $8,775.An interest payment on outstanding debt of $15,000 will be made in December.Using the information given,construct a pro forma income statement for the final quarter of 2004 for Parker.

Assume that Zybo,Inc.has sales of $10 million and inventory of $2 million.The corporation utilizes the percent-of-sales method of financial forecasting.If Zybo is expected to generate sales of $14 million next year,what will the firm's investment in inventory be?

The percent-of-sales method is more detailed than the cash budget method.

When fixed expenses increase relative to sales,it indicates that there is not enough productive capacity to absorb an increase in sales.

Holding other things constant,a firm's "discretionary financing needed" (the additional funds required in order to finance the firm)would be reduced if the firm experienced an increase in which of the following?

When forecasting statements,assets always increase proportionately to sales regardless of capacity.

Which of the following is NOT an element of the cash budget?

The primary purpose of a cash budget is to:

Which of the following is the correct method of determining discretionary financing needed (DFN)?

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 1,2004 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 1,2004.Assume that the interest rate on short-term borrowing is 1% per month. -Based on the information in Table 2,how much short-term financing is needed by March 30,2004?

Which of the following are considered to be spontaneous sources of financing (i.e. ,they arise naturally during the course of doing business)?

An increase in projected ________ will increase discretionary funds needed.

Spontaneous sources of financing include:

Typical steps in the financial planning process include:

The percentages used in the percent-of-sales method comes from pro forma financial statements.

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 accruals for the fiscal year ending 2002.