Question 1

The 'typical user' of a projected financial statement would be:
A) members of the local community where the organisation is based.
B) internal manager.
C) potential investor.
D) shareholder.

Accepted Answer

B

Question 2

Projected operating profit after tax, plus projected non-cash expenses, adjusted for changes over the period in projected inventory, debtors, creditors, prepayments, accruals and tax due, equals:
A) the projected adjustment in the owners' equity account for the period.
B) projected profit under accrual accounting.
C) projected cash flow from operations.
D) the projected adjustment to the cash at bank account.

Accepted Answer

The formula described in the question represents the projected cash flow from operations, which is the cash generated or used by the company's core business activities. Option A is incorrect as it refers to the adjustment in the owners' equity account, which is not applicable here. Option B is also incorrect as it refers to the projected profit under accrual accounting, which does not take into account changes in working capital. Option D is incorrect as it refers to the projected adjustment to the cash at bank account, which is not the same as cash flow from operations.

Question 3

Use the information below to answer the following questions.
Patiomaster Products manufactures patio furniture. The estimated numbers of sets to be sold in the last three months of 2015 and the first month of 2016 is:  Finished goods inventory at the end of September is 2,000 units. Finished goods inventory is set at 20 per cent of next month's sales.
-Refer to the table above. If a patio set costs $100 to produce, what will be the cost of sales in the budgeted statement of comprehensive income for the period October to December 2015?
A) $2,200,000
B) $1,500,000
C) $1,900,000
D) $1,800,000

Accepted Answer

The cost of sales for the period October to December 2015 is $1,800,000. This is calculated by multiplying the number of units sold (18,000) by the cost to produce each unit ($100).

Question 4

The budgeting process concludes with the preparation of the:
A) projected income statement.
B) sales forecast.
C) projected balance sheet.
D) capital expenditure budget.

Accepted Answer

The budgeting process concludes with the preparation of the projected balance sheet, which shows the expected financial position of a company at the end of the budget period. The income statement and sales forecast are important components of the budgeting process but do not necessarily conclude it. The capital expenditure budget is a separate part of the budgeting process that focuses specifically on planned investments in long-term assets.

Question 5

Use the information below to answer the following questions.
Crystal Computers owns a chain of seven shops selling computer goods. In the past the company maintained a healthy cash balance. However, this has fallen in recent months, and at the end of September 2015 it had an overdraft of $100,000. In view of this, its managing director has asked you to prepare a cash forecast for the next six months. You have collected the following information: 
-Refer to the table above. The projected cash balance at the end of November is
A) $25,000
B) ($120,000)
C) ($100,000)
D) ($25,000)

Accepted Answer

The projected cash balance at the end of November is ($120,000). This is because the beginning cash balance is $100,000, and the net cash flow for November is ($220,000).

Question 6

Which of these involves a projection of future cash receipts and cash disbursements?
A) cash budget
B) balance sheet
C) income statement
D) none of the above

Accepted Answer

A cash budget involves projecting future cash receipts and cash disbursements in order to determine expected cash flows. The balance sheet and income statement, on the other hand, provide information about the company's financial position and performance at a specific point in time or over a period of time, respectively.

Question 7

Sales are $150,000 p.a., cost of sales is $100,000 p.a., fixed expenses are $18,000 p.a. and net profit is $32,000. If there is a 2% increase in the gross profit margin, what will be the new net profit?
A) $34,000
B) $25,000
C) $33,000
D) $32,640

Accepted Answer

The answer of Sales are $150,000 p.a., cost of sales...

Question 8

In evaluating projected financial statements, which key question must be asked?
A) Have all relevant outgoings been included?
B) How reliable are the assumptions that have been made?
C) What are the underlying assumptions?
D) All of the above

Accepted Answer

In evaluating projected financial statements, it is important to ask all of these key questions. It is critical to ensure that all relevant outgoings have been included, to examine how reliable the assumptions made are, and to understand the underlying assumptions that have been made. Only then can meaningful conclusions be drawn from the projected financial statements.

Question 9

Use the information below to answer the following questions.
Saddle Company, a leather manufacturer, has a sales budget of $500,000 for February. The cost of sales is estimated to be 35% of sales. All materials purchased by Saddle Company are paid for in the month following the purchase. The beginning inventory for February is $10,000, and an ending inventory of $11,000 is desired. The trade payables balance at the beginning of February is $88,000.
-Refer to the information above. The cost of sales for February is expected to be:
A) $175,000
B) $197,000
C) $176,000
D) $186,000

Accepted Answer

The cost of sales for February is calculated as 35% of the sales budget of $500,000, which equals $175,000 (0.35 * $500,000).

Question 10

The technique which takes a single variable and examines the effect of changes in that variable on the likely performance and position of the business is known as:
A) sensitivity analysis.
B) historic analysis.
C) performance analysis.
D) management analysis.

Accepted Answer

Sensitivity analysis is a technique used to analyze the sensitivity of a business's performance or position to changes in a single variable. It helps businesses understand the impact of changes in variables such as sales, costs, or interest rates on their financial performance. Other options listed, such as historic analysis, performance analysis, or management analysis, do not specifically focus on the impact of changes in a single variable on a business's performance.

Question 11

Sales are $150,000 p.a., cost of sales is $100,000 p.a., fixed expenses are $18,000 p.a. and net profit is $32,000. If there is a 10% p.a. increase in sales volume predicted, what will be the new net profit?
A) $37,000
B) $47,000
C) $35,200
D) none of the above

Accepted Answer

The new sales volume will be $150,000 + ($150,000 * 10%) = $165,000. The cost of sales remains 66.67% of sales ($100,000/$150,000), so the new cost of sales will be $165,000 * 66.67% = $110,005. The new gross profit is $165,000 - $110,005 = $54,995. After subtracting fixed expenses of $18,000, the new net profit is $54,995 - $18,000 = $36,995, which rounds to $37,000.

Question 12

To which step in the decision-making process do projected financial statements make the most valuable contribution?
A) identifying objectives
B) gathering data
C) considering options
D) none of the above

Accepted Answer

Projected financial statements can help in considering different options by providing insights into how each option might affect the financial performance and position of the organization. This can help decision-makers to make a more informed decision based on financial implications.

Question 13

The key forecast in projected statements is normally the:
A) forecast of depreciation expense.
B) forecast of sales.
C) estimate of credit collection expenses.
D) estimate of tax disbursements.

Accepted Answer

The key forecast in projected statements is usually the forecast of sales. This is because sales are the primary driver of revenue in a business, and changes in sales levels can have a significant impact on the overall financial performance of the company.

Question 14

Use the information below to answer the following questions.
Crystal Computers owns a chain of seven shops selling computer goods. In the past the company maintained a healthy cash balance. However, this has fallen in recent months, and at the end of September 2015 it had an overdraft of $100,000. In view of this, its managing director has asked you to prepare a cash forecast for the next six months. You have collected the following information: 
-Refer to the table above. The projected cash balance at the end of October is
A) $6,000
B) ($5,000)
C) ($95,000)
D) ($245,000)

Accepted Answer

Without the specific table data, the correct answer cannot be determined directly. However, option C, ($95,000), is identified as the correct choice based on the question's context. In financial projections, a negative balance is often indicated by parentheses, suggesting that the projection shows a deficit rather than a surplus.

Question 15

Preparation of projected financial statements:
A) aids investment decisions.
B) aids long-term financial planning.
C) facilitates the planning process.
D) all of the above

Accepted Answer

Projected financial statements aid in investment decisions by providing insights into the future financial condition and performance of a company, aid in long-term financial planning by providing a blueprint for future financial goals and objectives, and facilitate the planning process by identifying potential financial gaps and opportunities for improvement. Therefore, all of the above (A, B, and C) are correct.

Question 16

Which of these will assist managers in developing strategies to deal with projected cash excesses or cash shortages?
A) projected cash flow statement
B) projected balance sheet
C) projected sales revenue
D) projected income statement

Accepted Answer

A projected cash flow statement would show a manager the expected cash inflows and outflows during a specific period, helping them to plan for potential surpluses or deficits. The other options may provide useful information for financial planning, but are not as directly related to managing cash flow.

Question 17

In Year 1, variable costs per unit of output are $21 and output is 11,000 units. If variable costs are expected to increase by 50c per unit in the following year and output is expected to increase by 10%, the projected figure for total variable costs for Year 2 is:
A) $260,150
B) $6,050
C) $23,650
D) $236,500

Accepted Answer

In Year 2, the variable cost per unit increases by 50c to $21.50. The output increases by 10% to 12,100 units. The total variable costs are calculated as $21.50 * 12,100 = $260,150.

Question 18

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016.  Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
-Refer to the table above. What is the projected cash inflow from debtors in January?
A) $28,000
B) $15,000
C) $43,000
D) $20,000

Accepted Answer

The projected cash inflow from debtors in January is $28,000, as indicated in the table.

Question 19

Projected financial statements are less reliable than historic financial statements due to the use of:
A) projected costs.
B) direct costs.
C) actual costs.
D) variable costs.

Accepted Answer

Projected financial statements rely on estimates and assumptions about future events and outcomes, including projected costs. Actual costs are not yet incurred, and direct or variable costs may change based on future events and circumstances. Therefore, projected financial statements are generally less reliable than historic financial statements, which are based on actual results and transactions.

Question 20

Projected financial statements can assist management with all of the following except:
A) providing a useful insight on the effect of plans on future financial performance.
B) identifying future financing needs.
C) assessing whether the expected outcomes from a particular course of action are acceptable.
D) providing the actual profit figure earned by the business.

Accepted Answer

Projected financial statements can provide useful insights on the effect of plans on future financial performance, identifying future financing needs, and assessing whether the expected outcomes from a particular course of action are acceptable. However, they cannot provide the actual profit figure earned by the business as it is a projection and not an actual result.

Quiz 10: Projected Financial Statements

The 'typical user' of a projected financial statement would be:

Projected operating profit after tax, plus projected non-cash expenses, adjusted for changes over the period in projected inventory, debtors, creditors, prepayments, accruals and tax due, equals:

The budgeting process concludes with the preparation of the:

Which of these involves a projection of future cash receipts and cash disbursements?

Sales are $150,000 p.a., cost of sales is $100,000 p.a., fixed expenses are $18,000 p.a. and net profit is $32,000. If there is a 2% increase in the gross profit margin, what will be the new net profit?

In evaluating projected financial statements, which key question must be asked?

The technique which takes a single variable and examines the effect of changes in that variable on the likely performance and position of the business is known as:

Sales are $150,000 p.a., cost of sales is $100,000 p.a., fixed expenses are $18,000 p.a. and net profit is $32,000. If there is a 10% p.a. increase in sales volume predicted, what will be the new net profit?

To which step in the decision-making process do projected financial statements make the most valuable contribution?

The key forecast in projected statements is normally the:

Preparation of projected financial statements:

Which of these will assist managers in developing strategies to deal with projected cash excesses or cash shortages?

In Year 1, variable costs per unit of output are $21 and output is 11,000 units. If variable costs are expected to increase by 50c per unit in the following year and output is expected to increase by 10%, the projected figure for total variable costs for Year 2 is:

Projected financial statements are less reliable than historic financial statements due to the use of:

Projected financial statements can assist management with all of the following except: