Question 1

The fact that long-term debt and common stock are raised infrequently and in large amounts lessens the need for the firm to forecast those accounts on a continual basis.

Accepted Answer

A) True 
 B)False

Question 2

A rapid build-up of inventories normally requires additional financing, unless the increase is matched by an equally large decrease in some other asset.

Accepted Answer

A) True 
 B)False

Question 3

Clayton Industries is planning its operations for next year, and Ronnie Clayton, the CEO, wants you to forecast the firm's additional funds needed (AFN) . The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year? Dollars are in millions.

Accepted Answer

A)   $102.8
B)   $108.2
C)   $113.9
D)   $119.9
E)   $125.9F) A) and B)
G) A) and C)

Question 4

As a firm's sales grow, its current assets also tend to increase. For instance, as sales increase, the firm's inventories generally increase, and purchases of inventories result in more accounts payable. Thus, spontaneous liabilities that reduce AFN arise from transactions brought on by sales increases.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is NOT a key element in strategic planning as it is described in the text?

Accepted Answer

A)   The mission statement.
B)   The statement of the corporation's scope.
C)   The statement of cash flows.
D)   The statement of corporate objectives.
E)   The corporation's strategies.F) C) and D)
G) All of the above

Question 6

The first, and most critical, step in constructing a set of forecasted financial statements is the sales forecast.

Accepted Answer

A) True 
 B)False

Question 7

The capital intensity ratio is generally defined as follows:

Accepted Answer

A)   Sales divided by total assets, i.e., the total assets turnover ratio.
B)   The percentage of liabilities that increase spontaneously as a percentage of sales.
C)   The ratio of sales to current assets.
D)   The ratio of current assets to sales.
E)   The amount of assets required per dollar of sales, or A0*/S0.F) A) and E)
G) A) and D)

Question 8

Which of the following statements is CORRECT?

Accepted Answer

A)   When we use the AFN equation, we assume that the ratios of assets and liabilities to sales (A0*/S0 and L0*/S0)  vary from year to year in a stable, predictable manner.
B)   When fixed assets are added in large, discrete units as a company grows, the assumption of constant ratios is more appropriate than if assets are relatively small and can be added in small increments as sales grow.
C)   Firms whose fixed assets are "lumpy" frequently have excess capacity, and this should be accounted for in the financial forecasting process.
D)   For a firm that uses lumpy assets, it is impossible to have small increases in sales without expanding fixed assets.
E)   There are economies of scale in the use of many kinds of assets. When economies occur the ratios are likely to remain constant over time as the size of the firm increases. The Economic Ordering Quantity model for establishing inventory levels demonstrates this relationship.F) All of the above
G) A) and D)

Exam 12: Financial Planning and Forecasting Financial Statements

The first, and most critical, step in constructing a set of forecasted financial statements is the sales forecast.

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
verified

Which of the following is NOT a key element in strategic planning as it is described in the text?

Correct Answer
verified

The fact that long-term debt and common stock are raised infrequently and in large amounts lessens the need for the firm to forecast those accounts on a continual basis.

Correct Answer
verified

A rapid build-up of inventories normally requires additional financing, unless the increase is matched by an equally large decrease in some other asset.

Correct Answer
verified

The capital intensity ratio is generally defined as follows:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exam 12: Financial Planning and Forecasting Financial Statements

The first, and most critical, step in constructing a set of forecasted financial statements is the sales forecast.

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Which of the following is NOT a key element in strategic planning as it is described in the text?

Correct AnswerverifiedShow Answer

The fact that long-term debt and common stock are raised infrequently and in large amounts lessens the need for the firm to forecast those accounts on a continual basis.

Correct AnswerverifiedShow Answer

A rapid build-up of inventories normally requires additional financing, unless the increase is matched by an equally large decrease in some other asset.

Correct AnswerverifiedShow Answer

The capital intensity ratio is generally defined as follows:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified