Question 1

Another name for the receipts and disbursements method,which is descriptive of the activity involved in coming up with the cash forecast when using this method,is&#10;A)scheduling&#10;B)accrual addback technique&#10;C)modified accrual method&#10;D)pro forma balance sheet approach

Accepted Answer

The name that is descriptive of the activity involved in coming up with the cash forecast when using the receipts and disbursements method is scheduling. This method involves scheduling receipts and disbursements based on expected timing, which is then used to create a cash forecast. The other options (accrual addback technique, modified accrual method, and pro forma balance sheet approach) are not directly related to the activity of scheduling receipts and disbursements.

Question 2

The main reasons for the monthly cash forecast serving as a valuable planning tool for top-level managers include the following EXCEPT:&#10;A)The monthly interval is thought to be adequate for anticipating funding requirements&#10;B)The typical billing and payment cycle in most industries is monthly&#10;C)It is useful for preparing the next year's cash budget&#10;D)None of the above are exceptions&#10;E)'b' and 'c'

Accepted Answer

The monthly cash forecast is indeed a valuable planning tool for top-level managers because it helps in anticipating funding requirements, aligns with the typical billing and payment cycle in most industries, and is useful for preparing the next year's cash budget. Therefore, none of the provided reasons are exceptions to its usefulness.

Question 3

An objective of accuracy within +/- 3% is most appropriate for which cash forecast horizon?&#10;A)tomorrow's cash forecast&#10;B)next week's cash forecast&#10;C)next three-month's cash forecast&#10;D)next five year's cash forecast

Accepted Answer

The objective of accuracy within +/- 3% is most appropriate for next three-month's cash forecast as it is a relatively short-term forecast horizon where cash movements can be predicted with a higher degree of accuracy compared to longer-term forecasts. For tomorrow's cash forecast or next week's cash forecast, a higher level of accuracy, ideally close to 100%, would be required. For next five year's cash forecast, the objective of accuracy within +/- 3% would be too lenient as the long-term forecast would be subject to more uncertainty and variability in economic conditions.

Question 4

The Johnson Company forecasts an ending cash balance for the month of January of $2,700,000.The historical standard deviation for January's ending cash position is $1,000,000.Assuming ending cash balances are normally distributed,what would be an estimate of the probability of the company ruing out of cash in January?

A)75%
B)50%
C)40%
D)20%
E)<5%

Accepted Answer

To calculate the probability of the company running out of cash in January, we need to find the standardized value of the ending cash balance using the formula: (ending cash balance - mean)/standard deviation.

Z = (0 - 2,700,000)/1,000,000 = -2.7

Using a standard normal distribution table, we can find the probability of Z being less than -2.7, which is approximately 0.0038 or <5%. Therefore, the answer is E.

Question 5

When evaluating the accuracy of a cash forecast range using r²,which of the following represents the highest accuracy: A)0 to 1.0 B)0 to 0.5 C)0 to -1.0 D)0.7 to 1.0

Accepted Answer

In r², the first character "r" represents the downside deviation of the forecast range, "S1" represents the confidence level of the forecast, "U1" represents the upside deviation of the forecast, "P12" represents the maximum percentage error of the forecast, "S1" represents the confidence level of the forecast again, "S1" represents the skewness of the forecast, and "P0" represents the minimum percentage error of the forecast. Therefore, a forecast range of 0.7 to 1.0 would be the best choice as it represents the highest accuracy range, given the confidence level of the forecast, maximum percentage error, and skewness of the data.

Question 6

The mixed approach to forecasting includes the ______________ and _______________ approaches.&#10;A)judgmental,simplistic&#10;B)computerized,quantitative&#10;C)judgmental,quantitative&#10;D)subjective,judgmental

Accepted Answer

The mixed approach to forecasting involves a combination of both the judgmental and quantitative approaches. Judgmental forecasting relies on expert opinions and insights, while quantitative forecasting uses mathematical models and data analysis to make predictions. Combining these two approaches can lead to more accurate and reliable forecasts. Option A, B, and D are incorrect because they do not reflect the correct combination of approaches involved in the mixed approach to forecasting.

Question 7

____________________ refers to fitting data to a model so that coefficients for the model can be determined.&#10;A)Variable identification&#10;B)Model calibration&#10;C)Hold-out sample estimation&#10;D)Model validation

Accepted Answer

Model calibration refers to the process of adjusting the coefficients in a model to fit the available data. This is typically done using statistical techniques such as regression analysis, and is essential for making accurate predictions using the model. Variable identification involves determining which variables to include in the model, while hold-out sample estimation and model validation are methods used to evaluate the performance of the model once it has been calibrated.

Question 8

Each of the following account for the corporate emphasis on short-term cash forecasts EXCEPT:&#10;A)financial staff salaries,in total,are lower for companies doing cash forecasts&#10;B)forecasts provide input into corporate financial policy evaluations&#10;C)forecasts function as a control device&#10;D)short-term investing and borrowing strategies are driven by cash forecasts

Accepted Answer

Financial staff salaries are not a reason for corporate emphasis on short-term cash forecasts. The other three options provide valid reasons why companies focus on these forecasts.

Question 9

The two main objectives for a monthly cash forecast are ______________ and _______________.&#10;A)inexpensiveness,simplicity&#10;B)computerization,accuracy&#10;C)quickness,simplicity&#10;D)usefulness,accuracy

Accepted Answer

The two main objectives for a monthly cash forecast are usefulness and accuracy. This means that the forecast should provide relevant and actionable information that will help the business make better decisions, and that the forecast should also be as precise and reliable as possible. While the other answer choices may be desirable qualities for a cash forecast, they are not the primary objectives.

Question 10

A company's forecasting philosophy refers to:&#10;A)The number of forecasts&#10;B)Who will make the forecasts&#10;C)Making of daily forecasts&#10;D)'a' and 'b'&#10;E)'a' 'b' and 'c'

Accepted Answer

The answer of A company's forecasting philosophy refers to:&#10;A)The number...

Question 11

The value for &#34;b&#34; in the regression equation Y = a + b(X)+ e is shown in Excel as&#10;A)the intercept&#10;B)the slope&#10;C)the forecasted variable&#10;D)the independent predictor variable&#10;E)none of the above

Accepted Answer

The answer of The value for &#34;b&#34; in the regression...

Question 12

______________ companies and/ or those with _____________ cash flow patterns are logically not as willing to spend very much time or money in developing cash forecasts.&#10;A)Large,stable&#10;B)Large,variable&#10;C)Small,stable&#10;D)Small,variable

Accepted Answer

The answer of ______________ companies and/ or those with _____________...

Deck 12: Cash Forecasting