Question 1

What is computed by dividing the amount of assets tied directly to sales (A*)by the amount of current sales (S₀)?

Accepted Answer

The computation of dividing the amount of assets tied directly to sales by the amount of current sales is called the capital intensity ratio. This ratio helps to measure how much capital or assets are required to generate a certain level of sales.

Question 2

The additional funds needed by the firm can be calculated by assuming which of the following?

Accepted Answer

C

Question 3

Which of the following is the amount of external financing a firm must seek in order to change the asset base as necessary to support a different level of sales?

Accepted Answer

The amount of external financing a firm must seek in order to change the asset base as necessary to support a different level of sales is referred to as the additional funds needed. This calculation takes into account the required increase in assets, as well as any increase in liabilities and changes in retained earnings.

Question 4

Which statement is most correct regarding how pro forma financial statements can be used to estimate additional funds needed?

Accepted Answer

Pro forma statements can be adjusted and refined over multiple iterations, allowing for a more accurate estimate of additional funds needed. Option B is incorrect as pro forma statements can be quite precise. Option C and D are also incorrect as they do not relate to how pro forma statements are used to estimate additional funds needed.

Question 5

Which of the following is a set of financial statements depicting an operating division of a firm's expected financial situation in the foreseeable future under the most reasonable set of assumptions concerning relevant factors?

Accepted Answer

Pro forma financial statements are used to project the financial performance of a business unit, project, or investment opportunity. Pro forma statements use assumptions about future conditions and expectations to forecast financial results, and are often used in financial modeling and business planning. Base case projections may be a component of pro forma financial statements, but they do not encompass the entire set of forecasts and assumptions that are included in a pro forma analysis. Deseasonalized financial statements remove the effects of seasonality on financial performance, but they do not address the future outlook for a business unit. Naїve financial statements may refer to actual historical financial statements or a simple set of financial statements without any forecasting or projections.

Question 6

Which of the following are considered "chunky" or "lumpy" assets?

Accepted Answer

Fixed assets such as property, plant, and equipment are considered chunky or lumpy assets due to their size and inability to be easily liquidated. Current assets, including cash, accounts receivable, and inventory, are typically more liquid and easier to convert to cash. Total assets and AFN are not specific categories of assets but rather calculations used in financial analysis.

Question 7

Forecasted sales drives all of the following EXCEPT:

Accepted Answer

Forecasted sales may impact the amount of assets, liabilities, and external funds needed, but it does not directly impact earnings per share on the annual report. Earnings per share are calculated based on net income and the number of outstanding shares of the company's stock.

Question 8

Which of the following defines MAPE?

Accepted Answer

MAPE stands for Mean absolute percentage error, which is a commonly used measure of accuracy for a forecast. It is calculated by taking the absolute percentage difference between the forecasted value and the actual value, and then averaging these differences across all periods. This gives a measure of the average magnitude of errors in the forecast, expressed as a percentage of the actual values.

Question 9

Which of the following can be computed as: necessary increase in assets minus spontaneous increase in liabilities minus projected increase in retained earnings?

Accepted Answer

The necessary increase in assets minus the spontaneous increase in liabilities minus the projected increase in retained earnings gives us the additional funds needed, which is required to meet the firm's growth plans.

Question 10

Which of the following is defined as assuming that future sales will be equal to the average historical value across some relevant period?

Accepted Answer

The answer of Which of the following is defined as...

Question 11

Which of the following is the practice of one firm selling to another on credit terms?

Accepted Answer

Trade credit refers to the practice of one firm selling to another on credit terms, allowing the buyer time to pay for the goods or services received. This is a common practice in business-to-business transactions. Accounts payable refers to the amount a company owes to its suppliers for goods or services purchased on credit terms, while accounts receivable refers to the amount a company is owed from its customers for goods or services provided on credit terms. Barter transactions involve the exchange of goods or services without the use of money.

Question 12

Which of the following defines iterative calculation?

Accepted Answer

Iterative calculation involves letting a spreadsheet program or calculator repeatedly compute an answer, taking into account circular dependencies in a system of equations. Choice A describes manually overriding a program, while choice B describes avoiding circular dependencies altogether. Choice D refers specifically to using the AFN formula, which is not necessarily iterative calculation.

Question 13

The simplest approach to estimating a future period's sales is to assume that they will be equal to those of the latest observed period.In statistics,this is often simply referred to as which of the following?

Accepted Answer

This approach is known as the Naïve approach where the assumption is made that the future period's sales will be equal to the latest observed period's sales without considering any factors that may affect sales such as seasonality or trends. This method is the simplest and easiest to use but may not always be the most accurate.

Question 14

Which of the following is used to remove the effects of seasonality from historic data?

Accepted Answer

Deseasonalized approach is used to remove the effects of seasonality from historic data. This approach allows for more accurate forecasting and trend analysis by eliminating the influence of seasonal fluctuations. The average approach simply takes an average of the data, the base case approach involves creating a scenario without any changes, and the pro forma approach involves projecting future financial statements based on assumptions and historical data.

Question 15

First order effects are defined as which of the following?

Accepted Answer

First order effects refer to the immediate and observable effects of making a change. These are the direct consequences that are most obvious and tangible. Therefore, option D is the correct answer.

Question 16

Which of the following defines the term deseasonalize?

Accepted Answer

Deseasonalize means to remove the effects of seasonality from historic data. This is typically done to get a better understanding of underlying trends and make more accurate forecasts for future periods. The other options (A, C, and D) are unrelated to deseasonalizing.

Question 17

The set of assumptions underlying the firm's financial plan and the resulting projected financial statements are accordingly often referred to as which of the following?

Accepted Answer

The answer of The set of assumptions underlying the firm's...

Question 18

If a firm has excess capacity when calculating AFN (Additional Funds Needed),A* will most likely equal which of the following?

Accepted Answer

When a firm has excess capacity, it means that its current assets are already able to cover its current liabilities and some of its long-term liabilities. Therefore, the additional funds needed (AFN) will only be needed to finance future growth or expansion. Since current assets are the most liquid and readily available to finance growth, A* in this case will most likely be equal to current assets.

Question 19

Financial planning involves estimating projected cash flows,which is useful for all the following EXCEPT:

Accepted Answer

Financial planning does not have a direct relationship with auditors determining the truthfulness and accuracy of a company's annual report.

Question 20

Suppose a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the naїve approach?

Accepted Answer

The answer of Suppose a firm has had the historical...

Quiz 15: Financial Planning and Forecasting

What is computed by dividing the amount of assets tied directly to sales (A*) by the amount of current sales (S₀) ?

The additional funds needed by the firm can be calculated by assuming which of the following?

Which of the following is the amount of external financing a firm must seek in order to change the asset base as necessary to support a different level of sales?

Which statement is most correct regarding how pro forma financial statements can be used to estimate additional funds needed?

Which of the following is a set of financial statements depicting an operating division of a firm's expected financial situation in the foreseeable future under the most reasonable set of assumptions concerning relevant factors?

Which of the following are considered "chunky" or "lumpy" assets?

Forecasted sales drives all of the following EXCEPT:

Which of the following defines MAPE?

Which of the following can be computed as: necessary increase in assets minus spontaneous increase in liabilities minus projected increase in retained earnings?

Which of the following is defined as assuming that future sales will be equal to the average historical value across some relevant period?

Which of the following is the practice of one firm selling to another on credit terms?

Which of the following defines iterative calculation?

The simplest approach to estimating a future period's sales is to assume that they will be equal to those of the latest observed period.In statistics,this is often simply referred to as which of the following?

Which of the following is used to remove the effects of seasonality from historic data?

First order effects are defined as which of the following?

Which of the following defines the term deseasonalize?

The set of assumptions underlying the firm's financial plan and the resulting projected financial statements are accordingly often referred to as which of the following?

If a firm has excess capacity when calculating AFN (Additional Funds Needed) ,A* will most likely equal which of the following?

Financial planning involves estimating projected cash flows,which is useful for all the following EXCEPT:

Suppose a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the naїve approach?

Quiz 15: Financial Planning and Forecasting

What is computed by dividing the amount of assets tied directly to sales (A*) by the amount of current sales (S0) ?

The additional funds needed by the firm can be calculated by assuming which of the following?

Which of the following is the amount of external financing a firm must seek in order to change the asset base as necessary to support a different level of sales?

Which statement is most correct regarding how pro forma financial statements can be used to estimate additional funds needed?

Which of the following is a set of financial statements depicting an operating division of a firm's expected financial situation in the foreseeable future under the most reasonable set of assumptions concerning relevant factors?

Which of the following are considered "chunky" or "lumpy" assets?

Forecasted sales drives all of the following EXCEPT:

Which of the following defines MAPE?

Which of the following can be computed as: necessary increase in assets minus spontaneous increase in liabilities minus projected increase in retained earnings?

Which of the following is defined as assuming that future sales will be equal to the average historical value across some relevant period?

Which of the following is the practice of one firm selling to another on credit terms?

Which of the following defines iterative calculation?

The simplest approach to estimating a future period's sales is to assume that they will be equal to those of the latest observed period.In statistics,this is often simply referred to as which of the following?

Which of the following is used to remove the effects of seasonality from historic data?

First order effects are defined as which of the following?

Which of the following defines the term deseasonalize?

The set of assumptions underlying the firm's financial plan and the resulting projected financial statements are accordingly often referred to as which of the following?

If a firm has excess capacity when calculating AFN (Additional Funds Needed) ,A* will most likely equal which of the following?

Financial planning involves estimating projected cash flows,which is useful for all the following EXCEPT:

Suppose a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the naїve approach?

What is computed by dividing the amount of assets tied directly to sales (A*) by the amount of current sales (S₀) ?