Quiz Module 3 Homework: HMG6477

Module 3 Homework: HMG6477

Which of the following equations represents a simple and effective way to think about anticipated external funding?

External funds required = assets – liabilities – equity
External funds required = assets + liabilities + equity
External funds required = assets + liabilities – equity
External funds required = assets + liabilities + equity


Managers often begin with an estimate of ________ when beginning to develop pro forma financial statements.

equity
assets
net income
sales


When constructing pro forma income statements which of the following is the last item to be estimated?

the change in retained earnings
sales
taxes
depreciation expense


When constructing a pro forma income statement, which of the following is likely to be calculated first among the items listed?

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When constructing pro forma balance sheets, ________ becomes the “plug” figure to make the balance sheet balance.

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Dunweiler Inc., is developing a pro forma income statement for the coming year.
The chief financial officer estimates that sales will be $150,000,000. If gross
profits are historically 36% of sales, what is the expected cost of goods sold (in
dollars)?

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Dunweiler Inc., is developing a pro forma income statement for the coming year.  The chief financial officer estimates that sales will be $150,000,000. If selling, general, and administrative expenses (SGA) are historically 18% of sales, what are the expected SGA expenses (in dollars)?

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Cantanna Inc., is developing a pro forma income statement for the coming year. The chief financial officer estimates that fixed assets are $70,000,000 and that sales will be $300,000,000. If depreciation is historically 20% of fixed assets, what is the expected amount of depreciation for the upcoming year (in dollars)?

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Jensen Inc. has net earnings of $24,000,000 this year and a dividend payout policy of 40% of earnings. If the firm follows its regular payout policy what will be the addition to retained earnings this year?

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Pro forma financial statements are an accountant’s way of looking back to see what “might have been.”

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Past relationships among variables on the balance sheet and income statement are typically POOR predictors of the future.

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Pro forma income statements are primarily based on forecasted sales and assumed relationships related to sales.

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In constructing a pro forma balance sheet a manager can estimate the accounts receivable because:

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When developing a pro forma balance sheet which of the following is typically the LAST item to be estimated?

total assets
cash
inventory
external financing

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The ________ is the critical connection between the pro forma income statement and the pro forma balance sheet.

change in cost of goods sold
change in retained earnings
change in net working capital
change in dividends

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In constructing a pro forma balance sheet, which of the following fills the role of being the “plug” figure to balance the balance sheet?

accounts payable
the change in retained earnings
external financing
accounts receivable

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A pro forma balance sheet typically begins with the assets and then we estimate the liabilites and equity

True
False

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A firm’s ending equity equals the firms beginning equity less any change in long- term debt.

True
False

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A firm’s ending equity equals the firms beginning equity plus any change in retained earnings.

True
False

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A pro forma ________ forecasts the timing and amount of cash inflows and cash outflows.

income statement
balance sheet
annual report
cash budget

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When estimating a cash budget, which of the following items should the firm NOT include in the process?

taxes paid by the firm

All responses should be included
wages
dividends

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Which of the following is the primary source of cash inflows in a pro forma cash budget?

anticipated sales
anticipated dividends
anticipated equity
anticipated net earnings

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Which of the following choices would NOT be considered a cash outflow?

capital expenditures
operational expense
anticipated sales
selling, general, and administrative expenses

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On-The-Level
Manufacturing

January February March
Purchases $40,000 $45,000 $60,000
Sales Billed $75,000 $85,000 $95,000
On -The-Level Manufacturing buys materials on credit at the start of the month and pays in 60 days. They also sell on credit, bill customers at the beginning of the month, and receive payment 30 days later. Using the table, what is the net cash flow from purchases and sales for the month of March?

$45,000
$40,000
There is NOT enough information to answer this question.
-$45,000

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On-The-Level
Manufacturing

January February March

Purchases $40,000 $45,000 $60,000
Sales Billed $75,000 $85,000 $95,000
On -The-Level Manufacturing buys materials on credit at the start of the month and pays in 60 days. They also sell on credit, bill customers at the beginning of the month, and receive payment 30 days later. Using the table, what is the net cash flow from purchases and sales for the month of February?

-$45,000
$45,000
There is NOT enough information to answer this question.
$40,000

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A cash budget is often more valuable as a SHORT-term rather than a LONG-TERM financial forecasting vehicle.

True
False

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Forecasted net cash flows are the difference between forecasted cash inflows and forecasted cash outflows.

True
False

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The generation of cash budgets and pro forma financial statements are equivalent ways of forecasting financial needs.

True
False

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The process of determining the effects of one key variable on the overall outcome of a pro forma income statement, for example, is known as:

ratio analysis
form analysis
sensitivity analysis
scenario analysis

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Because key variables are often related rather than isolated we often change our estimates for selected variables simultaneously when examining pro format statements. We call this type of activity:

scenario analysis
ratio analysis
sensitivity analysis
form analysis

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Pro forma financial statements may be valuable for which of the following reasons?

To help determine if and how much debt financing is required
To help us estimate how profitable a firm is expected to be
All responses are true.
To help banks determine if firms are likely to meet lending standards

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Your firm’s sales are estimated to increase by 10% in the next year. However, soon after the beginning of the year it becomes apparent that the growth in salesbis more likely to be 20%. If your cost of good sold consists of only variable¬†expenses, and the relationship between revenues and costs remain the same, which of the following situations would you expect to be true?

The percentage change in gross profit should be less than the percentage change in sales.

The percentage change in gross profit should be greater than the percentage change in sales.

The percentage change in gross profit should be the same as the percentage change in sales.

The percentage change in gross profit should be zero because gross profit is not a function of sales if all CGS are variable.

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Which of the following choices will lead to a DECREASE in loan requirements

a shortened days in inventory
All response will lead to a decrease
an increase payables period
an increased collection period

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Sensitivity analysis highlights the impact of a change in one key variable on another key variable.

True
False

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Felton Financial Inc, had net earnings last year of $487,000. If the firm has a dividend payout policy of 30%, what was the addition to retained earnings?

$146,100
$487,000
There is not enough information to answer this question.
$340,900

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