FORECASTING:MISCONCEPTION CHECK
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A projected excess cash balance for the month may be *
1 point
financed with short-term securities
invested in long-term securities
invested in marketable securities
financed with long-term securities
The first step in constructing a financial planning model is to: *
1 point
determine the mix of securities that the company will need to issue.
project future cash flows from operations.
determine the amount of external financing that is needed.
determine what additional fixed assets the company will need.
If a firm expects short-term cash surpluses, it can plan ________. *
1 point
short-term borrowing
leverage decisions
long-term investments
short-term investments
1. The net fixed asset investment (NFAI) is defined as the change in net fixed assets
plus depreciation. 2. The net current asset investment (NCAI) is defined as the change
in current assets minus the change in sum of the accounts payable and accruals *
1 point
both statements are true
first statement is true
first statement is false
both statements are false
1. The statement of cash flows allows the financial manager and other interested parties
to analyze a firm's past and possibly future profitability. 2. Net operating profit after
taxes (NOPAT) represents a firm's earnings after deducting both interest and taxes. *
1 point
both statements are true
both statements are false
first statement is false
first statement is true
The ________ method of developing a pro forma balance sheet estimates values of
certain balance sheet accounts while external financing is used as a balancing, or plug,
figure. *
1 point
cash flow
judgmental
percent-of-sales
accrual
A firm plans to retire outstanding bonds in the next planning period. Which of the
following gets affected? *
1 point
pro forma income statement and pro forma balance sheet
pro forma income statement and proxy statement
previous year income statement and statement of retained earnings
previous year income statement and previous year balance sheet
Given a financial manager's preference for faster receipt of cash flows, ________. *
1 point
the manager is not concerned with depreciable life, because once purchased, depreciation is
considered a sunk cost
a shorter depreciable life is preferred to a longer one
the manager is not concerned with depreciable life, because depreciation is a noncash expense
a longer depreciable life is preferred to a shorter one
In the next planning period, a firm plans to change its policy of all cash sales and initiate
a credit policy requiring payment within 30 days. The statements that will be directly
affected immediately are the ________. *
1 point
cash budget and statement of retained earnings
pro forma balance sheet and cash budget
pro forma income statement and pro forma balance sheet
pro forma income statement, balance sheet, and cash budget
All of the following are part of the financial planning process except: *
1 point
deciding which risks are worth taking.
projecting the future.
minimizing risk.
analyzing investment and financing options.
A financial planning model will generally include all of the following except the: *
1 point
projected sales.
forecast increase in retained earnings.
required increase in fixed assets.
listing of the firm's goals.
A firm's final sales forecast is usually a function of *
1 point
internal and external factors in combination
the salesperson's estimates of demand
its accounts receivable
its net income
1. A firm's free cash flow (FCF) represents the amount of cash flow available to
investors (stockholders and bondholders) after the firm has met all operating needs and
after having paid for net fixed asset investments and net current asset investments 2.
Operating cash flow (OCF) is equal to a firm's net operating profits after taxes minus all
non-cash charges. *
1 point
both statements are false
first statement is true
first statement is false
both statements are true
In general, firms that are subject to a high degree of ________, relatively short
production cycles, or both, tend to use shorter planning horizons. *
1 point
operating certainty
profitability
financial certainty
financial planning
The firm's current financial statements would be included in: *
1 point
the inputs of a financial plan.
the planning model for the financial plan.
no part of the financial plan.
the outputs of the financial plan.
Once sales are forecasted, ________ must be generated to estimate required raw
materials. *
1 point
a production plan
a purchases budget
an operational plan
a cash budget
Outputs from a financial plan would include such items as: *
1 point
a pro forma statement of sources and uses of cash.
the firm's current financial statements.
sales growth forecasts.
a percentage of sales planning model.
A firm has prepared the coming year's pro forma balance sheet resulting in a plug figure
in a preliminary statement—called the external financing required—of negative
P250,000. The firm may prepare to ________. *
1 point
do nothing; the balance sheet balances
sell common stock totaling P250,000
invest in marketable securities totaling P250,000
arrange for a loan of P250,000
Which one of the following is not typically included among the three major components
of a financial planning model? *
1 point
Inputs: current financial statements, forecasts of key variables
Shareholders’ risk preferences
Planning model: equations specifying key relationships
Outputs: pro formas, financial ratios, sources and uses of cash
Which one of these best describes the relationship between net working capital (NWC)
and sales? *
1 point
NWC will change by the same percentage as sales.
NWC changes in direct relation to sales, but the change may be less than proportional with sales.
NWC changes by a greater percentage than the change in sales, but the change is linear in
nature.
NWC is unaffected by changes in the sales level.
The percentage-of-sales method of preparing pro forma income statements assumes
that *
1 point
all costs inversely vary with sales
all costs are variable
all costs are independent
sales are fixed
The final variable to have its value determined in a financial plan is often referred to as
the: *
1 point
retained earnings plowback.
growth forecast.
net income.
balancing item
Which of the following represents a way of coping with uncertainty in a cash budget? *
1 point
careful estimation of cash budgets outputs
developing a pro forma income statement to forecast sales and then express the various income
statement items as percentage of projected sales
always using the prior year's data for estimates of the future
using scenario analysis, or "what if" approach, to analyze cash flows under a variety of
circumstances
The flexibility of financial plans is evident in the extent that: *
1 point
the plans can be adapted when conditions change.
planning output is the same regardless of economic conditions.
actual profits will deviate from projected profits.
use of the plans can be extended.
The percent-of-sales method to prepare a pro forma income statement assumes a firm
has no fixed costs. Therefore, the use of the past cost and expense ratios generally
tends to ________ profits when sales are increasing. *
1 point
understate
overstate
accurately predict
have no effect on
Utilizing past cost and expense ratios (percent-of-sales method) when preparing pro
forma financial statements will tend to ________. *
1 point
overstate profits when sales are increasing
understate profits when sales are increasing
understate profits when sales are decreasing
neither understate nor overstate profits
Alternative "what if?" scenarios can be easily accommodated in financial planning by
use of *
1 point
leverage ratios
spreadsheet programs.
sustainable growth models.
planning outputs.
When most of the elements of a financial plan are related to sales levels, the plan is: *
1 point
a percentage of sales model.
not adjusted for inflation
less likely to be effective.
using sales as a plug figure.
In a period of rising sales utilizing past cost and expense ratios (percent-of-sales
method), when preparing pro forma financial statements and planning financing, will
tend to ________. *
1 point
overstate retained earnings and overstate the additional financing needed
understate retained earnings and understate the additional financing needed
overstate retained earnings and understate the financing needed
understate retained earnings and overstate the financing needed
1. Free cash flow (FCF) is the cash flow a firm generates from its normal operations;
calculated as EBIT minus taxes plus depreciation 2. A firm's operating cash flow (OCF)
is the cash flow it generates from its normal operations: producing and selling its output
of goods or services. *
1 point
first statement is false
first statement is true
both statements are false
both statements are true
In preparing a cash budget, the ________ seasonal and uncertain a firm's cash flows,
the ________ the number of budgeting intervals it should use. *
1 point
more; greater
more; fewer
less; fewer
less; greater
The key aspects of a financial planning process are ________. *
1 point
cash planning and profit planning
cash planning and investment planning
operations planning and investment planning
investment planning and profit planning
The weakness of the judgmental approach to preparing a pro forma balance sheet is _ *
1 point
the assumption that the firm's past financial condition is an accurate predictor of its future
the assumption that the firm faces linear total revenue and total operating cost functions
ease of calculation and preparation
the assumption that the values of certain accounts can be forced to take on desired levels
An internal forecast is based on ________. *
1 point
developing the pro forma income statement to forecast sales and then express the various income
statement items as percentage of projected sales
the prediction of a firm's sales over a given period through surveys sent to financial analysts
the relationships between a firm's sales and certain economic indicators
a buildup, or consensus, of sales forecasts through a firm's own sales channels, adjusted for
additional factors such as production capabilities
Which of the following is a source of cash flows? *
1 point
increase in marketable securities
decrease in notes payable
repurchase of stock
increase in accounts payable
Which of the following would be the least likely to utilize a cash budget *
1 point
public investors
top management
lenders
middle management
Pro formas refer to: *
1 point
deviations in results from previous financial plans.
plans developed by a certified financial planner
the inputs in the financial planning process.
projected financial statements
Of the following components of a cash budget, generally the easiest to estimate would
be the *
1 point
cash receipts
cash sales
cash disbursements
month-to-month short-term borrowing
Which one of the following is not a reason for compiling financial plans? *
1 point
Considering options
Calculating the optimal plan
Contingency planning
Forcing consistency
One way a firm can reduce the amount of cash it needs in any month is to *
1 point
accrue taxes
speed up payment of accounts payable
delay the payment of wages
slow down the payment of receivables
Next
IDENTIFICATION & MULTIPLE CHOICE
CAPITAL LETTERS ONLY. NO OTHER SYMBOLS PLS
Important aspects of operationalizing strategy for budget purposes do not include: *
1 point
development of appropriate performance criteria
implementation of appropriate control systems
calculating depreciation and amortisation
identification of required resources
Identify the ITEM as a cash flow from operating activities (O), a cash flow from
investment activities (I), or a cash flow from financing activities (F). WRITE O, I or F.
ITEM:Sale of equipment *
1 point
Your answer
What is the meaning of POSITIVE AFN IN SCF ACTIVITY? *
1 point
Your answer
2ND OTHER TERM FOR AFN *
1 point
Your answer
1A positive external funds requirement would indicate that the firm’s financing is in
excess of its needs and that funds would therefore be available for repaying debt,
repurchasing stock, or increasing the dividend to stockholders 2If the net cash flow is
less than the minimum cash balance, financing is required *
1 point
1ST STATEMENT IS TRUE
1ST STATEMENT IS FALSE
BOTH STATEMENTS ARE TRUE
BOTH STATEMENTS ARE FALSE
1ST method of sales forecasting technique based on what people do *
1 point
Your answer
1Net operating profit after taxes (NOPAT) represents the firm’s earnings after deducting
both interest taxes. 2The firm’s free cash flow (FCF) represents the amount of cash flow
available to pay bank loans after the firm has met all operating needs and after having
paid for net fixed asset investments and net current asset investments. *
1 point
1ST STATEMENT IS TRUE
1ST STATEMENT IS FALSE
BOTH STATEMENTS ARE TRUE
BOTH STATEMENTS ARE FALSE
[Link] plans will rarely succeed unless the forecasts are perfect. 2Financial
planning models routinely adjust for present value and risk. *
1 point
1ST STATEMENT IS TRUE
1ST STATEMENT IS FALSE
BOTH STATEMENTS ARE TRUE
BOTH STATEMENTS ARE FALSE
The assumptions underlying a company’s financial planning model do not include: *
1 point
levels of sales growth
levels of working capital
levels of investment
levels of directors’ remuneration
1ST METHOD of determining AFN *
1 point
Your answer
1ST OTHER TERM FOR AFN *
1 point
Your answer
Identify the ITEM as a cash flow from operating activities (O), a cash flow from
investment activities (I), or a cash flow from financing activities (F). WRITE O, I or F.
ITEM:Rent payment *
1 point
Your answer
1.A major deficiency of the statement of cash flows is that it doesn't explicitly consider
non-cash transactions. 2, An increase in an asset is a source of funds. *
1 point
1ST STATEMENT IS TRUE
1ST STATEMENT IS FALSE
BOTH STATEMENTS ARE TRUE
BOTH STATEMENTS ARE FALSE
2ND METHOD of determining AFN *
1 point
Your answer
A budget is not *
1 point
a part of the strategic management process
a forecast
a plan
a qualitative statement
The firm's current financial statements would be included in. *
1 point
the inputs of a financial plan.
the planning model for the financial plan
the outputs of the financial plan.
no part of the financial plan.
[Link] cash budget is only as useful as the accuracy of the forecasts used in preparing
it. 2The basic information needed to construct a flow of funds statement is found on
the income statement *
1 point
1ST STATEMENT IS TRUE
1ST STATEMENT IS FALSE
BOTH STATEMENTS ARE TRUE
BOTH STATEMENTS ARE FALSE
[Link] the cash budget shows cash flows on a monthly basis, the information
provided by the cash budget is adequate for ensuring solvency.. 2Because the cash
budget shows cash flows only on a monthly basis, the information provided by the cash
budget is not necessarily adequate for ensuring solvency *
1 point
1ST STATEMENT IS TRUE
1ST STATEMENT IS FALSE
BOTH STATEMENTS ARE TRUE
BOTH STATEMENTS ARE FALSE
1ST method of sales forecasting technique based on what people have done *
1 point
Your answer
[Link] is a use of funds. 2, A forecast balance sheet could be estimated based
on a firm's past financial ratios. *
1 point
1ST STATEMENT IS TRUE
1ST STATEMENT IS FALSE
BOTH STATEMENTS ARE TRUE
BOTH STATEMENTS ARE FALSE
1st method of sales forecasting technique based on what people say *
1 point
Your answer
Identify the ITEM as a cash flow from operating activities (O), a cash flow from
investment activities (I), or a cash flow from financing activities (F). WRITE O, I or F.
ITEM:Depreciation expense *
1 point
Your answer
1Due to the no fixed costs assumption in the percent of sales method, the use of cost
and expense ratios generally tends to understate profits when sales are increasing and
overstate profits when sales are decreasing. 2It would be correct to define Operating
Cash Flow (OCF) as net operating profit after taxes minus depreciation. *
1 point
1ST STATEMENT IS TRUE
1ST STATEMENT IS FALSE
BOTH STATEMENTS ARE TRUE
BOTH STATEMENTS ARE FALSE
SAMPLE OF INTERNAL SOURCE OF FINANCING *
1 point
Your answer
A forecast is not: *
1 point
a prediction of future events
based on extrapolation of past data
a budget
based on expert opinion
The implications of the forecasts from a financial plan are determined by the: *
1 point
plan inputs.
balancing item.
planning model.
plowback ratio.
Outputs from a financial plan would include such items as: *
1 point
Sales growth forecasts.
a percentage of sales planning model.
a pro forma statement of sources and uses of cash
The firm's current financial statements
2ND method of sales forecasting technique based on what people say *
1 point
Your answer
1One basic weakness of the simplified pro forma approaches lies in the assumption
that certain variables, such as cash, accounts receivable, and inventories, can be forced
to take on certain “desired” values.. 2Required financing and excess cash are typically
viewed as short term. Therefore, required financing may be represented by notes
payable and excess cash is assumed invested in a liquid, interest paying vehicle such as
marketable securities *
1 point
1ST STATEMENT IS TRUE
1ST STATEMENT IS FALSE
BOTH STATEMENTS ARE TRUE
BOTH STATEMENTS ARE FALSE
Strategic plans are: *
1 point
short-term
budgets
forecasts
long-term
What is the 2nd stage in finance process *
1 point
Your answer
Pro formas refer to: *
1 point
plans developed by a Certified Financial Planner.
the inputs in the financial planning process.
projected financial statements.
deviations in results from previous financial plans.
Identify the ITEM as a cash flow from operating activities (O), a cash flow from
investment activities (I), or a cash flow from financing activities (F). WRITE O, I or F.
ITEM:Sale of common stock *
1 point
Your answer
Identify the ITEM as a cash flow from operating activities (O), a cash flow from
investment activities (I), or a cash flow from financing activities (F). WRITE O, I or F.
ITEM:Purchase of fixed assets *
1 point
Your answer
What is the meaning of NEGATIVE AFN IN SCF ACTIVITY? *
1 point
Your answer
Identify the ITEM as a cash flow from operating activities (O), a cash flow from
investment activities (I), or a cash flow from financing activities (F). WRITE O, I or F.
ITEM:Dividend payment *
1 point
Your answer
Next
ESSAY
LIMIT YOUR ANSWER 200 TO 300 WORDS
Briefly discuss the TIPO of financial measure of performance *
In financial measure of performance or the financial statement analysis, tools such as
ratio, trend, horizontal, vertical, regression, and graphical analysis are to be used.
The input here is the financial statements. There are five types of financial statements
namely: income statement, balance sheet, statement of change in equity, statement of
cash flow, and notes to financial statements.
Financial statement analysis is the process in measuring the firm’s financial
performance. It assesses financial management performance as well.
Combining these tools, inputs, and process, we will come up to several decisions which
can help the firm’s finance operations and performance.
Briefly discuss the TIPO of financial controlling *
Financial controlling is part of the company's management system. Its main task it to achieve
liquidity and company's ability to pay its obligations at proper time. It could be represented in the
form of three-phase cycle of planning, implementation and control. In addition, it consists of
tools, inputs, process, and outputs. Here, we make use of inventory, creditor, or debtor analysis
as tools. These involve consolidation of supplier base to maximize purchasing and payment
efficiency, unlocking of cash tied in stocks, reduce SKUs, review product profitability, demand
forecasting, and improvisation of debtors and credit control.
Financial plans are the most important inputs into financial controlling. It is a road map, a
guideline, a reminder of what your goals are–what you are trying to achieve in the short-term and
the long-term. It lays out what your possible costs are, and it seeks out to address avenues for
how to manage these costs.
Working capital management, on the other hand, is the process in financial controlling. It helps
companies effectively make use of current assets and maintain sufficient cash flow to meet short-
term goals and obligations.
After the process, we will have an output in the form of decisions. These decisions are all based
on the tools, inputs, and processes used.
Briefly discuss the TIPO of finance process. *
In finance process, tools such as budgets, financial statements, financial statement analysis, and
working capital management will be used. Working capital management can deliver significant
business benefits in a relatively short period of time, where idle capital can be effectively and
efficiently utilized.
The input here consists of sales forecast. Every business benefit from a sales forecast because it
enables them to make more informed business decisions. It aids in the planning, budgeting, and
risk management of the business as a whole. Sales forecasting enables businesses to allocate
resources efficiently for future growth while also managing their cash flow.
Finance process, on the other hand, will be applied to make decisions. These decisions are
necessary to the firm and will help in the whole financial operation.
compare & contrast savings with investment *
Although the terms "saving" and "investing" are often used interchangeably, we should
be doing both to ensure our financial security in the long run. Saving and investing have
one thing in common: they are both of the utmost importance to us.
The most significant distinction between saving and investing is the amount of risk
involved. In order to save, you must deposit your funds into an appropriate financial tool,
such as money market account or certificate of deposit. Although there's little chance of
losing money, there are also few opportunities to make money. Generally, you can
access your savings when you need them if you put money aside (or after a period of
time). The potential for long-term gains or rewards is greater when investing, but the
risk of loss is also greater.
For a higher return, you must take on more risk, but the downside is that you could lose
a lot of money. Before making any decisions, take a look at your goals to see which one
is most important to you: saving or investing? An incorrect choice may result in large
expenses or a loss of potential investment income, both of which could be very
expensive.
Another distinction is interest, which refers to the money that is earned. Investing is
about making money, while saving is about keeping our money safe and earning next to
nothing.
Briefly discuss the TIPO of financial planning *
Financial planning is the process of determining how financial resources will be used to achieve
goals and objectives. It comprises sources of funds (financial resources) and utilization of funds
(financial techniques). Additionally, it consists of tools, inputs, process, and outputs. Here, we
make use of master budget as a tool. It is a comprehensive financial planning document that
includes all of the lower-level budgets, cash flow forecasts, budgeted financial statements, and
financial plans of an organization. The sales forecast is one of the most important inputs into
financial planning. Every business benefit from a sales forecast because it enables them to make
more informed business decisions. It aids in the planning, budgeting, and risk management of the
business as a whole. Sales forecasting enables businesses to allocate resources efficiently for
future growth while also managing their cash flow. Budgeting, on the other hand, is the process
in making financial plans. It is simply a spending plan that takes into account both current and
future income and expense amounts. After the process, we will have an output of a projected
financial statement (proforma financial statement). Proforma financial statements are used to
facilitate the comparison of historical data and future performance projections.
Briefly discuss the TIPO of financial controlling *
Financial controlling is part of the company's management system. Its main task it to achieve
liquidity and company's ability to pay its obligations at proper time. It could be represented in the
form of three-phase cycle of planning, implementation and control. In addition, it consists of
tools, inputs, process, and outputs. Here, we make use of inventory, creditor, or debtor analysis
as tools. These analyses deal in studying and understanding the stock/product mix combined with
the knowledge of the demand for stock/product, the firm’s creditors, and debtors.
Financial plans are the most important inputs into financial controlling. It is a road map, a
guideline, a reminder of what your goals are–what you are trying to achieve in the short-term and
the long-term. It lays out what your possible costs are, and it seeks out to address avenues for
how to manage these costs.
Working capital management, on the other hand, is the process in financial controlling. It helps
companies effectively make use of current assets and maintain sufficient cash flow to meet short-
term goals and obligations.
After the process, we will have an output in the form of decisions. These decisions are all based
on the tools, inputs, and processes used.