Question 1

Projecting sales price changes depends on factors specific to the firm and its industry that might affect demand and price elasticity. Which of the following companies would most likely not be able to increase prices in the near future?

Accepted Answer

A)  A firm in a capital intensive industry that is expected to operate near capacity for the near future. 
B)  A firm in a capital intensive industry in which excess capacity exists. 
C)  A firm operating in an industry that is expected to maintain its current production processes. 
D)  A firm operating in an industry that is transitioning from the introduction phase to the high growth phase of its life cycle.

Question 2

Baseball Card Land, Inc. sells baseball cards and other memorabilia. The company tries to maintain a cash balance equivalent to approximately 30 days of sales. Sales in 2006 amounted to $352,412 and the company expects growth in 2007 of 33% and in 2008 of 40%. Given the information provided about Baseball Card Land what is the company's 2008 projected annual sales?

Accepted Answer

A)  $656,191 
B)  $493,377 
C)  $187,483 
D)  $542,333

Question 3

Financial statement forecasts rely on additivity within financial statements and articulation across financial statements. Given this information forecasts of future growth in inventory will most likely affect growth in

Accepted Answer

A)  accounts receivables. 
B)  accounts payable. 
C)  depreciation. 
D)  salary payable.

Question 4

Baseball Card Land, Inc. sells baseball cards and other memorabilia. The company tries to maintain a cash balance equivalent to approximately 30 days of sales. Sales in 2006 amounted to $352,412 and the company expects growth in 2007 of 33% and in 2008 of 40%. Given the information provided about Baseball Card Land what is the company's 2007 projected year-end cash balance?

Accepted Answer

A)  $966 
B)  $28,965 
C)  $15,623 
D)  $38,524

Question 5

Projecting sales price changes depends on factors specific to the firm and its industry that might affect demand and price elasticity. Which of the following types of companies would most likely be able to increase prices?

Accepted Answer

A)  A firm in a capital intensive industry that is expected to operate near capacity for the near future. 
B)  A firm in a capital intensive industry in which excess capacity exists. 
C)  A firm operating in an industry that is expected to experience technological improvements in its production process. 
D)  A firm operating in an industry that is transitioning from the high growth to the maturity phase of its life cycle.

Question 6

The following balance sheet and income statement pertain to Graham Corp., using the following assumptions complete a forecasted 2008 income statement:

Accepted Answer

The answer of The following balance sheet and income statement...

Question 7

Toys, Inc. manufactures and markets toys. Selected income statement data from 2005 and 2004 appear below:
  Required:

Accepted Answer

The answer of Toys, Inc. manufactures and markets toys. Selected...

Question 8

Firms which have differentiated ___________________________________ for its products may have a greater potential to increase prices.

Accepted Answer

The answer of Firms which have differentiated ___________________________________ for its...

Question 9

For some types of assets, such as plant, property and equipment, asset growth typically ____________________ future sales growth.

Accepted Answer

The answer of For some types of assets, such as...

Question 10

Realistic expectations are ____________________ and ____________________.

Accepted Answer

The answer of Realistic expectations are ____________________ and ____________________....

Question 11

Clothes, Inc. sells women's clothes. Provided below is selected financial statement information:
  Required:

Accepted Answer

The answer of Clothes, Inc. sells women's clothes. Provided below...

Question 12

As an analyst it is important when projecting sales to make estimates about future changes in sales volume. Compare how you might make estimates about future sales value for a company in a mature industry and one in a rapidly growing industry.

Accepted Answer

The answer of As an analyst it is important when...

Question 13

The authors set forth a six step forecasting game plan for preparing pro forma financial statements. Discuss the six steps necessary to prepare the three principal financial statements.

Accepted Answer

The answer of The authors set forth a six step...

Question 14

One problem caused by using turnover ratios to calculate asset balances is that it can lead to volatility in projected ending balances. What might an analyst do to reduce the "sawtooth" pattern caused by using turnover ratios?

Accepted Answer

The answer of One problem caused by using turnover ratios...

Question 15

To develop forecasts of individual assets, the analyst must first link historical growth rates for individual assets to historical growth rates in sales or other ___________________________________.

Accepted Answer

The answer of To develop forecasts of individual assets, the...

Question 16

Financial statement forecasts should rely on _________________________ across financial statements.

Accepted Answer

The answer of Financial statement forecasts should rely on _________________________...

Question 17

You are provided the following information about Davis Corp.s Accounts Receivable and Sales:
  Required:

Accepted Answer

The answer of You are provided the following information about...

Question 18

Just Camshafts sells auto parts. Provided below is selected financial information from the company's 2007 annual report:  Just Camshafts forecasts that sales will grow by 25% in 2008 and that its cost of goods sold to sales ratio will be the same in 2008 as it was in 2007. If these assumptions prove correct and Just Camshafts inventory turnover ratio for 2008 is 4.5 what will be the level of inventory at the end of 2008?

Accepted Answer

A)  $31,353 
B)  $38,320 
C)  $40,000 
D)  $42,314

Question 19

To develop forecasts of individual assets the analyst must first link historical growth rates for individual assets to historical growth rates in ____________________ and other activity-based drivers.

Accepted Answer

The answer of To develop forecasts of individual assets the...

Question 20

A company that has a cost structure in which its costs grow at a lesser rate than its sale enjoys ___________________________________.

Accepted Answer

The answer of A company that has a cost structure...

Exam 10: Forecasting Financial Statements