Exam 17: Financial Forecasting and Planning

If the firm's current fixed assets are sufficient to support the projected level of new sales,then these assets would be projected to remain unchanged for the forecast period.

Home to House Distributors is preparing a cash budget.The initial conclusion is that the firm will need to borrow more money than its bank is willing to lend.Which of the following actions could Home to House Distributors perform to reduce its need for bank financing this year?

The treasurer for Brookdale Clothing must decide how much money the company needs to borrow in July.The balance sheet for June 30,2004 is presented below: The company expects sales of $250,000 for July.The company has observed that 25% of its sales is for cash and that the remaining 75% is collected in the following month.The company plans to purchase $400,000 of new clothing.Usually 40% of purchases is for cash and the remaining 60% of purchases is paid in the following month.Salaries are $100,000 per month,lease payments are $50,000 per month,and depreciation charges are $20,000 per month.The company plans to purchase a new building for $200,000 in July and sell its marketable securities for $100,000.If the company must maintain a minimum cash balance of $50,000,how much money must the company borrow in July?

Holding all other variables constant,as the dividend payout ratio decreases,the sustainable growth rate increases.

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. -Miller Metalworks had sales in November of $60,000,in December of $40,000,and in January of $80,000.Miller collects 40% of sales in the month of the sale and 60% one month after the sale.Calculate Miller's cash receipts for January.

Strategic planning encompasses all of the following EXCEPT:

Discretionary sources of financing are those sources that vary automatically with a firm's level of sales.

As of December 31,Budget,Inc.had a cash balance of $50,000.December sales were $150,000 and are expected to be $100,000 in January.20% of sales in any month are cash sales,and 80% of sales are collected during the following month.In January,Budget is expected to have total cash disbursements of $120,000,and Budget requires a minimum cash balance of $50,000.Budget's expected cash receipts for January are:

The initiation of a major advertising campaign would be an example of an event that would affect past trends in sales when projecting statements.

The cash budget consists of all the following factors EXCEPT:

Which of the following is always a non-cash expense?

Which of the following will decrease cumulative borrowing on the cash budget?

Considering each action independently and holding other things constant,which of the following actions would increase a firm's discretionary financing needed (the need for additional capital)?

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

Assume all else remains the same.Which of the following statements is true?

Long-term financial plans must include capital expenditures.

The key ingredient in a firm's financial planning is the sales forecast.

Depreciation expense is always included in the cash budget as it reflects the impact of fixed asset purchases.

Purchases of plant and equipment can be determined from the:

Discuss the basic functions that budgets perform for a firm.