Question 1

Apple Two Enterprises expects to generate sales of $5,950,000 for fiscal 2002;sales were $3,450,000 in fiscal 2001.Assume the following figures for the fiscal year ending 2001: cash $70,000;accounts receivable $250,000;inventory $400,000;net fixed assets $520,000;accounts payable $235,000;and accruals $155,000.Use the percent-of-sales method to forecast cash for the fiscal year ending 2002.
A)$120,725
B)$75,003
C)$216,418
D)$319,604

Accepted Answer

First, we need to calculate the projected increase in sales:

Projected increase = (Projected sales - Actual sales) / Actual sales 
Projected increase = ($5,950,000 - $3,450,000) / $3,450,000 
Projected increase = 0.7246 or 72.46%

Next, we can use this projected increase to forecast the other accounts:

Cash forecast = Actual cash * (1 + Projected increase) 
Cash forecast = $70,000 * (1 + 0.7246) 
Cash forecast = $120,725

Therefore, the answer is A.

Question 2

Long-term financial planning results in:
A)a cash budget.
B)pro forma financial statements.
C)a sales forecast for the next 1 to 3 years.
D)a general narrative detailing near-term scenarios.

Accepted Answer

Long-term financial planning typically involves creating pro forma financial statements for a period of several years, outlining projected income, expenses, and cash flows. A cash budget may be a component of this planning, but it alone is not sufficient for comprehensive long-term planning. A sales forecast may be included in the plan, but it is not the primary focus. A general narrative may be helpful in communicating the plan, but it does not replace the need for detailed financial statements.

Question 3

Typical steps in the financial planning process include:
A)preparing a sales forecast.
B)analyzing cost data.
C)estimating tax expense.
D)all of the above.

Accepted Answer

The typical steps in the financial planning process include preparing a sales forecast, analyzing cost data, and estimating tax expense. Therefore, option D which states "all of the above" is the best choice.

Question 4

What are the key questions that a strategic plan attempts to answer? How does it relate to financial plans?

Accepted Answer

The answer of What are the key questions that a...

Question 5

The key ingredient in a firm's financial planning is the sales forecast.

Accepted Answer

The sales forecast is a crucial element in a firm's financial planning as it provides an estimate of future revenues which helps in budgeting, determining costs, and making investment decisions.

Question 6

Short-term financial planning results in:
A)a cash budget.
B)pro forma financial statements.
C)a sales forecast for the next 1 to 3 years.
D)a general narrative detailing near-term scenarios.

Accepted Answer

The answer of Short-term financial planning results in:
A)a cash budget.
B)pro...

Question 7

Long-term financial plans typically encompass:
A)6 to 12 months.
B)about 5 years.
C)5 to 10 years.
D)the entire lifecycle of the corporation.

Accepted Answer

The answer of Long-term financial plans typically encompass:
A)6 to 12...

Question 8

Which of the following statements about the percent-of-sales method of financial forecasting is true?
A)It is the least commonly used method of financial forecasting.
B)It is a much more precise method of financial forecasting than a cash budget would be.
C)It involves estimating the level of an expense,asset,or liability for a future period as a percent of the forecast for sales revenues.
D)It projects all liabilities as a fixed percentage of sales.

Accepted Answer

The percent-of-sales method involves estimating the level of an expense, asset, or liability for a future period as a percent of the forecast for sales revenues. It is not the least commonly used method and it is not necessarily more precise than a cash budget. It also does not project all liabilities as a fixed percentage of sales.

Question 9

The "percentage" used in the percent-of-sales calculation can be obtained from:
A)the most recent financial statement item as a percent of current sales.
B)an average computed over several years.
C)an analyst's judgment.
D)all of the above.

Accepted Answer

The percentage used in the percent-of-sales calculation can be obtained from a variety of sources, including the most recent financial statement item as a percent of current sales, an average computed over several years, or an analyst's judgment. This allows for flexibility in forecasting and adapting to different financial analysis scenarios.

Question 10

Short-term financial plans span a period of:
A)up to five years.
B)one to three years.
C)a year or less.
D)1 month or less.

Accepted Answer

Short-term financial plans typically cover a timeframe of one year or less. Options A, B, and D all extend beyond this time period.

Question 11

A sales forecast for the coming year would reflect:
A)any past trend which is expected to continue.
B)the influence of any events that might materially affect the past trend.
C)both A and B.
D)neither A nor B.

Accepted Answer

A sales forecast for the coming year should take into account any past trends that are expected to continue (choice A), as well as the influence of any events that might materially affect the past trend (choice B). By considering both of these factors, businesses can create a more accurate and realistic sales forecast for the coming year. Therefore, choice C is the best answer.

Question 12

The first step involved in predicting financing needs is:
A)projecting the firm's sales revenues and expenses over the planning period.
B)estimating the levels of investment in current and fixed assets that are necessary to support the projected sales.
C)determining the firm's financing needs throughout the planning period.
D)none of the above.

Accepted Answer

Before determining financing needs, it is necessary to project the firm's sales revenues and expenses over the planning period in order to estimate the cash inflows and outflows. This information is necessary to estimate financing needs accurately.

Question 13

Types of plans that businesses typically use to guide their operations include:
A)strategic plans.
B)long-range financial plans.
C)short-range financial plans.
D)all of the above.

Accepted Answer

Businesses typically use all of the above mentioned plans to guide their operations. Strategic plans provide a long-term vision for the business, while long-range financial plans focus on financial goals over a multi-year period. Short-range financial plans, on the other hand, are more focused on the immediate future, typically covering a one-year period. All of these plans are important for different stages of the business and help guide decision making and operations.

Question 14

Because financial planning usually takes place in a highly uncertain environment,
A)it is rarely worth the time and expense.
B)time horizons should be limited to a few months.
C)it is important to develop contingency plans to respond to unexpected events.
D)it should avoid such specific issues as what sources of financing to use.

Accepted Answer

Developing contingency plans is crucial in a highly uncertain environment in order to prepare for unexpected events that may impact financial planning. It allows for flexibility and readiness to adjust plans accordingly. The other options are incorrect as financial planning is an important and worthwhile process, time horizons can vary based on individual circumstances, and specific issues such as sources of financing must be addressed in financial planning.

Question 15

What is the most important ingredient in developing a firm's financial plan?
A)A forecast of sales revenues
B)Determining the amount of dividends to pay shareholders
C)Projecting the rate of interest on proposed new debt
D)Deciding upon which method of depreciation a firm should utilize

Accepted Answer

A forecast of sales revenues is the most important ingredient in developing a firm's financial plan as it provides the basis for all other financial decisions, such as determining expenses, investments, and financing needs. Without a reliable sales forecast, a firm cannot accurately plan for other financial activities.

Question 16

The percent-of-sales method can be used to forecast:
A)expenses.
B)assets.
C)liabilities.
D)all of the above.

Accepted Answer

The percent-of-sales method is a financial forecasting model used to estimate various financial figures, such as expenses, assets, and liabilities, based on their relationship to sales. It assumes that these figures will maintain a constant ratio to sales over time.

Question 17

Discuss the basic functions that budgets perform for a firm.

Accepted Answer

The answer of Discuss the basic functions that budgets perform...

Question 18

Why is financial planning important in a highly uncertain financial environment.

Accepted Answer

The answer of Why is financial planning important in a...

Question 19

Strategic planning encompasses all of the following EXCEPT:
A)a cash budget.
B)a description of the firm's core competencies and activities.
C)a definition of the firm's customers.
D)a description of the firm's competitors and its own competitive strengths and weaknesses.

Accepted Answer

A cash budget is not typically considered part of strategic planning. It is a component of financial planning and budgeting. The other options listed (B, C, and D) are all key elements of strategic planning.

Question 20

The financial planning process is the responsibility of:
A)financial analysts.
B)operations staff.
C)marketing staff
D)financial analysts,marketing staff,and operations staff interacting as a group.

Accepted Answer

The financial planning process should involve financial analysts who are responsible for analyzing financial data, marketing staff who will have insights into customer behavior and demand, and operations staff who will be familiar with the day-to-day logistics of the business. Working together as a group is essential to creating a comprehensive financial plan that takes into account all relevant factors. Therefore, option D is the best choice as it includes all the necessary parties involved in the financial planning process.

Quiz 17: Financial Forecasting and Planning

Long-term financial planning results in:

Typical steps in the financial planning process include:

What are the key questions that a strategic plan attempts to answer? How does it relate to financial plans?

The key ingredient in a firm's financial planning is the sales forecast.

Short-term financial planning results in:

Long-term financial plans typically encompass:

Which of the following statements about the percent-of-sales method of financial forecasting is true?

The "percentage" used in the percent-of-sales calculation can be obtained from:

Short-term financial plans span a period of:

A sales forecast for the coming year would reflect:

The first step involved in predicting financing needs is:

Types of plans that businesses typically use to guide their operations include:

Because financial planning usually takes place in a highly uncertain environment,

What is the most important ingredient in developing a firm's financial plan?

The percent-of-sales method can be used to forecast:

Discuss the basic functions that budgets perform for a firm.

Why is financial planning important in a highly uncertain financial environment.

Strategic planning encompasses all of the following EXCEPT:

The financial planning process is the responsibility of: