Chapt

er04-Fi
nanci
alFor
ecast
ing

Chapter04
Fi
nanci
alForecasti
ng

Mul
ti
pleChoi
ceQuest
ions
 

1.
 I
nusingasy stemsapproacht
ofi
nanci
alpl
anni
ng,
iti
snotnecessar
ytodev
elopa:
 
A.
 profor
mai ncomestatement.
B.
 cashbudget.
C.
 profor
mabal ancesheet.
D.
 conti
ngentli
abil
it
ypl
an.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
02Pr eparethefourf
inanci
alst
atement
sforf
orecast
ingt
heprof
ormai
ncomest
atement
;thepr
ofor
ma
statementofretai
nedear ni
ngs;thecashbudget;andt
heproformabal
ancesheet.
Topic:04-03ProFor maIncomeSt atement
 

2.
 Thekeyiniti
alelementi
ndev
elopi
ngpr
ofor
mast
atement
sis:
 
A.
 acashbudget .
B.
 anincomest atement.
C.
 asalesforecast.
D.
 acollect
ionsschedule.

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
03Perfor
mt hespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-04Establi
shaSal
esPr oj
ecti
on
 

4-
1
Chapt
er04-Fi
nanci
alFor
ecast
ing

3.
 I
deall
y,salespr oj
ecti
onsshouldbederi
vedf
rom:
 
A.
 anexternalviewpoint.
B.
 anint
ernal vi
ewpoint.
C.
 bothi
nternal andexternal
viewpoi
nts.
D.
 themarket i
ngdepar t
ment.

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
03Perfor
mt hespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-04Establi
shaSal
esPr oj
ecti
on
 

4.
 Requir
edpr oducti
ondur i
ngapl anningperi
odwi
l
ldependont
he:
 
A.
 costofbeginninginventor
yofpr oducts.
B.
 credi
tsalesduringtheperiod.
C.
 desir
edlevelofbeginninginventory
.
D.
 desir
edlevelofendinginventory.

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mthespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-06OtherExpenseI
tems
 

5. 
Af ir
m hasforecast
edsal
esof$4,
000inJanuary,$6,
000i nFebruary
,and$5,500in
Mar ch.Al
lsal
esar eoncr
edi
t.40%i
scoll
ectedt
hemont hofsal eandtheremaindert
he
fol
lowingmont h.Howmuchiscoll
ect
edfrom accountsreceiv
ableinFebruar
y? 
A. 
$5,400
B. 
$4,800
C. 
$6,000
D. 
$3,000

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-10CashPay ment
s
 

4-
2
Chapt
er04-Fi
nanci
alFor
ecast
ing

6. 
Afi
rm hasf
orecastedsal
esof$3,
000inApri
l
,$4,500inMay,and$6,
500inJune.
All
sal
esareoncredi
t.30%iscoll
ect
edthemonthofsaleandtheremai
nderthefol
l
owing
month.Whatwil
lbethebalancei
naccount
srecei
vableattheendofJune? 
A. 
$1,
950
B. 
$6,
500
C. 
$4,
550
D. 
$5,
100

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-10CashPay ment
s
 

7. 
XYZCo.hasf or ecast
edJunesalesof600unit
sandJulysal
esof1000uni t
s.The
companymai ntainsendinginvent
oryequal
to125%ofnextmonth'ssal
es.June
beginni
nginventoryrefl
ect
st hi
spoli
cy.Whati
sJune'
srequi
redproduct
ion? 
A. 
1,100unit
s
B. 
-0-uni
ts
C. 
500units
D. 
400units

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mthespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-06OtherExpenseI
tems
 

8.
 I
nt heconstructi
onoft hecashpaymentsschedul
e,t
hemaj
orcashpay
menti
s
general
ly:
 
A. 
thegeneralandadmi ni
str
ati
veexpense.
B. 
costsassociatedwithinvent
orymanufactur
ed.
C. 
int
erestanddi vi
dends.
D. 
payment sf
ornewpl antandequipment.

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
herequi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-11ProFor maBal
anceSheet
 

4-
3
Chapt
er04-Fi
nanci
alFor
ecast
ing

9. 
Afirm hasbegi
nni
nginv
entor
yof300unitsatacostof$11each.Product
ionduri
ng
theperiodwas650unit
sat$12each.
Ifsal
eswere700units,
whatisthecostofgoods
sold(assumeFIFO)?
 
A. 
$9,000
B. 
$8,000
C. 
$7,700
D. 
$8,100

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mthespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-06OtherExpenseI
tems
 

10.
 Af i
rm hasbeginni
nginvent
oryof300unit
satacostof$11each.Pr
oduct
ion
duri
ngt heperi
odwas650uni tsat$12each.I
fsal
eswere700unit
s,whati
stheval
ue
oftheendinginventor
yusingFIFO? 
A. 
$2,750
B. 
$3,000
C. 
$3,300
D. 
$2,550

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mthespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-06OtherExpenseI
tems
 

11. 
Thediff
erencebetweent
otal
recei
ptsandt
otal
pay
ment
sisr
efer
redt
oas:
 
A. 
cumulati
vecashf l
ow.
B. 
begi
nningcashflow.
C. 
netcashflow.
D. 
cashbalance.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-05Calcul
atether
equirednewfunds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-12Explanati
onofPr oFormaBalanceSheet
 

4-
4
Chapt
er04-Fi
nanci
alFor
ecast
ing

12. 
Thepercent-of
-salesmethodoffinanci
alforecast
ing:
 
A. 
ismoredet ai
l
edt hanacashbudgetappr oach.
B. 
requi
resmor eti
met hanacashbudgetappr oach.
C. 
assumest hatbalancesheetaccountsmaintainaconstantr
elat
ionshi
ptosal
es.
D. 
provi
desamont h-t
o-monthbreakdownofdat a.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

13. 
Int
hepercent
-of-
salesmethod: 
A. 
asthedi
vi
dendpay outrati
ogoesup, therequir
ednewf undsalsori
se.
B. 
asthedi
vi
dendpay outrati
ori
ses,requir
ednewf undsdecline.
C. 
thedi
vi
dendpay outr
atiodoesnotaffectnewf unds.
D. 
achangetotheex-di
v i
denddatecausest herequirednewf undstochange.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

14. 
Inforecasti
ngaf irm'scashneedsforsomef ut ur
eperi
od: 
A. 
theper cent
-of
-salesmet hodisadetailedappr oach.
B. 
cashbudget sarel essexactthantheper cent-
of-sal
esmet hod.
C. 
acashbudgetappr oachcannotdealeffecti
velywi t
hbothlevel
andseasonal
producti
onschedul es.
D. 
acashbudgetappr oachcandealeffecti
v el
ywi t
hbot hl
evelandseasonal
producti
onschedul es.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

4-
5
Chapt
er04-Fi
nanci
alFor
ecast
ing

15. 
Whenusingtheper cent
-of-sal
esmet hodinforecasti
ngfundsneeded,whichoft
he
fol
lowi
ngisnottrue? 
A. 
Asthedivi
dendpay outrati
odecr eases,t
herequirednewf undsalsodecr
ease.
B. 
Requi
rednewf undsdecr easeaspr ofi
tsmarginsincrease.
C. 
Requi
rednewf undsi ncr
easeasaccumul at
edamor t
izat
ionincr
eases.
D. 
Asthetaxrat
ei ncr
eases, t
her equi
rednewf undsincrease.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

16. BHSI nc.deter
minest
hatsal
eswil
lri
sefrom $300,000to$500,000nextyear.
Spont aneousassetsare70%ofsal
esandspont aneousli
abil
i
tiesare30%ofsales.
BHShasa10%pr ofi
tmargi
nanda40%dividendpay outr
ati
o.Whati st
helev
el of
requirednewf unds? 
A. $50,000
B. 
$20, 000
C. $100,000
D. BHSi sinbalanceandnonewfundsareneeded.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Appl y
Diff
icult
y:Hard
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

4-
6
Chapt
er04-Fi
nanci
alFor
ecast
ing

17. 
Indevel
opingtheprofor
mai ncomestat ementwefoll
owfourimportantst
eps:1)
computeotherexpenses,
2)determineapr oducti
onschedul
e,3)est
abli
shasal es
proj
ecti
on,4)determi
neprofi
tbycompl et
ingtheactualpr
oformastatement.Whatis
thecorr
ectorderfort
hesefoursteps?
 
A. 
1,2,3,4
B. 
4,3,2,1
C. 
2,1,3,4
D. 
3,2,1,4

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
02Preparethefourf
inanci
alst
atement
sforf
orecast
ingt
heprof
ormai
ncomest
atement
;thepr
ofor
ma
statementofretai
nedearni
ngs;thecashbudget;andt
heproformabal
ancesheet.
Topic:04-04Establi
shaSal
esPr oj
ecti
on
 

18.
 Inor
dertoesti
mat eproduct
ionrequir
ement s,we: 
A. 
addbegi
nninginventor
ytoproject
edsal esinunitsandsubtr
actdesir
edending
i
nventor
y.
B. 
addproj
ectedsal
esi nunit
stodesiredendinginventoryandsubt
ractbeginni
ng
i
nventor
y.
C. 
addbegi
nninginventor
ytodesiredendinginventoryanddivi
debytwo.
D. 
addbegi
nninginventor
ytodesiredendinginventoryandsubtr
actproj
ectedsalesi
n
uni
ts.

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mthespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-06OtherExpenseI
tems
 

19.
 Ingeneral,thelar
gerthepor
tionofaf i
rm'ssal
est
hatar
eoncr
edi
t,t
he:
 
A. 
lowerwillbet hefi
rm'sneedtoborrow.
B. 
higherwil
l bet hef
ir
m'sneedtobor row.
C. 
mor erapi
dl ycredi
tsaleswi
ll
bepai doff.
D. 
mor ethefirm canbuyr awmateri
alsoncredit
.

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Under st
and
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mthespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-15ActualBudget
 

4-
7
Chapt
er04-Fi
nanci
alFor
ecast
ing

20. 
Prof or
maf i
nanci
alstatementsarenot:
 
A. 
themostcompr ehensivemeansoff i
nancialf
orecasti
ng.
B. 
oftenrequi
redbyprospect i
vecr
edit
ors.
C. 
projecti
onsoffi
nanci
al stat
ementsforafutur
eper i
od.
D. 
partoftheyearendfil
i
ngwi t
hthesecur
iti
esregulat
or.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
02Pr eparethefourf
inanci
alst
atement
sforf
orecast
ingt
heprof
ormai
ncomest
atement
;thepr
ofor
ma
statementofretai
nedear ni
ngs;thecashbudget;andt
heproformabal
ancesheet.
Topic:04-03ProFor maIncomeSt atement
 

21. 
Theneedf oranincr
easeordecr
easei
nshor
t-
ter
m bor
rowi
ngcanbepr
edi
ctedby
: 
A. 
ratioanal
ysis.
B. 
trendanalysi
s.
C. 
acashbudget .
D. 
ani ncomest at
ement.

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-09CashReceipts
 

22. 
Af i
rm ut
il
izi
ngFIFOi nvent
oryaccounti
ngwould,
incalcul
ati
nggrosspr
ofi
ts,
assumet hat
: 
A. 
allsal
eswer efrom curr
entproducti
on.
B. 
allsal
eswer efrom begi
nninginvent
ory.
C. 
salesweref r
om beginninginv
entoryunt
ili
twasdepl
eted,andthenusesal
esfrom
curr
entproduction.
D. 
allsal
eswer eforcash.

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mt hespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-04Establi
shaSal
esPr oj
ecti
on
 

4-
8
Chapt
er04-Fi
nanci
alFor
ecast
ing

23. 
Afir
mhast argeteda40%gr owthinsalest
hisyear.
Lastyear'
scashasaper centof
sal
eswas15%, accountsrecei
vable30%,andinvent
ory35%.Whatper centagegrowth
i
ncur r
entasset
si srequi
redtosupportthegrowthinsalesunderthepercent-
of-
sales
for
ecasti
ngmet hod? 
A. 
32%
B. 
26%
C. 
18%
D. 
Notenoughinformat i
ontotell
.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

24.
 Ar apidrateofgrowthinsal
esandpr ofi
tsmayrequi
re:
 
A. 
higherdividendpaymentstoshar
eholders.
B. 
i
ncr easedbor r
owingbythefi
rmtosuppor tthesal
esi
ncrease.
C. 
thef i
rmt obelessleni
entwit
hcreditcustomers.
D. 
salesf or
ecaststobemadel essfr
equently.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

4-
9
Chapt
er04-Fi
nanci
alFor
ecast
ing

25. 
Fir
msthatsuccessfull
yincreaset heirratesofinventor
yt ur
noverwi
l
l,amongot
her
thi
ngs,:
 
A. 
beablet
or educetheirborrowingneeds.
B. 
beablet
or educethei
rdividendpay ment stoshareholders.
C. 
fi
nditmorediffi
cul
ttobegi v
encr editbyt hei
rresourcesupplier
s.
D. 
haveagreaterneedforhighbal ancesi ntheircashaccount s.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

26. 
Inf
inancialst
atements,thenumberofunit
sshowni ncostofgoodssol
das
comparedt othenumberoft heuni
tsactual
l
ypr oduced:
 
A. 
isal
way shigher.
B. 
i
salway slower.
C. 
isal
way sthesame.
D. 
canbeei t
herhigherorlower.

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-09CashReceipts
 

27. 
Thepr oformaincomest at
ementi
simpor
tanttot
heover
allprocessof
constr
uctingproformastatement
sbecausei
tall
owsustodetermineaval
uef
or:
 
A. 
changei nret
ainedear
nings.
B. 
grosspr of
it
.
C. 
int
erestexpense.
D. 
prepaidexpenses.

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-08CashBudget
 

4-
10
Chapt
er04-Fi
nanci
alFor
ecast
ing

28. 
Netcashfl
owi sequalt
o: 
A. 
incomeaft
ertaxesminusamor t
izati
on.
B. 
i
ncomeaf t
ertaxesminusdivi
dends.
C. 
cashrecei
ptsminuscashpayment s.
D. 
cashrecei
ptsminuscashpayment sminusamor
ti
zat
ion.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-05Calcul
atether
equirednewfunds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-12Explanati
onofPr oFormaBalanceSheet
 

29. 
Indev el
opingdat aforaccountsr
ecei
vabl
efort
hepr
ofor
mabal
ancesheet
,the
anal
y stismostlikelytoturntothe:
 
A. 
prof ormaincomest at
ement.
B. 
cashbudget .
C. 
priorbalancesheet .
D. 
statementofr etai
nedear ni
ngs.

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-09CashReceipts
 

30. 
Whichofthef oll
owingismostl i
kel
ytoi
ncr
easet
hef
inal
numberf
ornot
espay
abl
e
i
nthepr ofor
mabal ancesheet? 
A. 
Decreaseininventory.
B. 
Incr
easeinretainedearnings.
C. 
Decreaseinaccount spayable.
D. 
Decreaseinaccount sreceiv
able.

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mthespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-13Analysi
sofProFormaStat
ement
 

4-
11
Chapt
er04-Fi
nanci
alFor
ecast
ing

31. 
Inthedevel
opmentoftheprof
ormaf
inanci
alst
atement
s,t
hel
astst
epi
nthe
processisthedevel
opmentoft
he:
 
A. 
cashbudget.
B. 
proformabalancesheet
.
C. 
proformaincomestatement
.
D. 
capital
budget.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
02Pr eparethefourf
inanci
alst
atement
sforf
orecast
ingt
heprof
ormai
ncomest
atement
;thepr
ofor
ma
statementofretai
nedear ni
ngs;thecashbudget;andt
heproformabal
ancesheet.
Topic:04-03ProFor maIncomeSt atement
 

32.
 Inacashbudget ,t
hecumul ati
vecashbalanceisequalt
o: 
A. 
netcashflowmi nusthebeginningcashbalance.
B. 
netcashfl
owpl usthebeginningcashbalance.
C. 
cumulat
iveloanbalancemi nustheendingcashbalance.
D. 
cumulati
veloanbalanceplustheendingcashbalance.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Hard
LearningObjecti
ve:04-05Calcul
atether
equirednewfunds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-12Explanati
onofPr oFormaBalanceSheet
 

33. 
Intheper cent-of-
salesmet hod,anincr
easei
ndi
vi
dends:
 
A. 
willi
ncreaser equirednewf unds.
B. 
will
decr easer equirednewfunds.
C. 
hasnoef fectonr equir
ednewf unds.
D. 
mor einformat ionisneeded.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObject
ive:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

4-
12
Chapt
er04-Fi
nanci
alFor
ecast
ing

34. 
Int
hepercent
-of
-sal
esmethodi
f(A/
S1)andL/
S1)bot
hincr
ease,
then:
 
A. 
RNFstaysthesame.
B. 
RNFgoesdown.
C. 
RNFgoesup.
D. 
moreinf
ormati
onisneeded.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

35. 
Inusingasystemsapproachtof
inanci
alpl
anni
ng,
iti
snecessar
ytodev
elop
everyt
hingexcept
: 
A. 
proformaincomestatement.
B. 
cashbudget.
C. 
proformabalancesheet
.
D. 
acollect
ionschedul
e.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
02Pr eparethefourf
inanci
alst
atement
sforf
orecast
ingt
heprof
ormai
ncomest
atement
;thepr
ofor
ma
statementofretai
nedear ni
ngs;thecashbudget;andt
heproformabal
ancesheet.
Topic:04-03ProFor maIncomeSt atement
 

36. 
Af irm hasforecast
edsalesof$8,000inJanuary
,$12,000inFebruar
y,and$11,000
i
nMar ch.Allsalesareoncredi
t.40%i scoll
ect
edthemont hofsaleandtheremainder
thefollowingmont h.Howmuchi scoll
ectedfr
om accountsrecei
vablei
nFebruary? 
A. 
$10,800
B. 
$9,600
C. 
$12,000
D. 
$6,000

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-09CashReceipts
 

4-
13
Chapt
er04-Fi
nanci
alFor
ecast
ing

37. 
Af i
rm hasforecast
edsalesof$3,000inApr
il
,$4,
500inMay ,and$12,
000inJune.
Allsal
esar eoncredit
.30%iscoll
ectedthemonthofsal
eandt heremaindert
he
fol
lowingmont h.Whatwil
lbethebalanceinaccount
srecei
vableattheendofJune? 
A. 
$1,950
B. 
$6,500
C. 
$8,400
D. 
$5,100

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-09CashReceipts
 

38. 
ABCCo.hasf orecast
edJunesalesof600unit
sandJulysal
esof900uni t
s.The
companymai ntainsendinginvent
oryequal
to130%ofnextmonth'ssal
es.June
beginni
nginventoryrefl
ect
st hi
spoli
cy.Whati
sJune'
srequi
redproduct
ion? 
A. 
990units
B. 
-0-uni
ts
C. 
1,000unit
s
D. 
800units

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mthespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-06OtherExpenseI
tems
 

39.
 Af i
rm hasbeginni
nginventor
yof400unitsatacostof$11each.Pr
oducti
on
duri
ngt heperi
odwas650uni tsat$12each.
Ifsal
eswere700unit
s,whatist
hecostof
goodssol d(assumeFIFO)?
 
A. 
$9,000
B. 
$8,000
C. 
$7,700
D. 
$8,100

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mthespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-06OtherExpenseI
tems
 

4-
14
Chapt
er04-Fi
nanci
alFor
ecast
ing

40. 
Af i
rm hasbeginni
nginvent
oryof300unit
satacostof$11each.Pr
oduct
ion
duri
ngt heperi
odwas650uni tsat$12each.I
fsal
eswere800unit
s,whati
stheval
ue
oftheendinginventor
yusingFIFO? 
A. 
$1,800
B. 
$3,250
C. 
$3,600
D. 
$7,800

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mthespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-06OtherExpenseI
tems
 

41. BHSI nc.deter
minest
hatsal
eswil
lri
sefrom $300,000to$700,000nextyear.
Spont aneousassetsare70%ofsal
esandspont aneousli
abil
i
tiesare30%ofsales.
BHShasa10%pr ofi
tmargi
nanda40%dividendpay outr
ati
o.Whati st
helev
el of
requirednewf unds? 
A. $118,000
B. 
$40, 000
C. $70,000
D. BHSi sinbalanceandnonewfundsareneeded.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Appl y
Diff
icult
y:Hard
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

42. 
Fir
mst hatdecreaset heirratesofinv
ent or
yturnoverwil
l,amongot
hert
hings:
 
A. 
havetoincreasetheirbor rowingneeds.
B. 
beabletor educetheirdividendpay mentstoshareholders.
C. 
fi
nditeasiertobegi vencr editbythei
rresourcesuppli
ers.
D. 
havealesserneedf orhi ghbal ancesi
nt hei
rcashaccount s.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Under st
and
Diff
icult
y:Medium
LearningObjecti
ve:04-05Calcul
atether
equirednewfunds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-12Explanati
onofPr oFormaBalanceSheet
 

4-
15
Chapt
er04-Fi
nanci
alFor
ecast
ing

43. 
Whichofthefoll
owingismostl i
kel
ytodecr
easet
hef
inal
numberf
ornot
espay
abl
e
i
nthepr ofor
mabal ancesheet ? 
A. 
Incr
easeininventor
y.
B. 
Decreasei
nr etai
nedearnings.
C. 
Incr
easeinaccountspay able.
D. 
Incr
easeinaccountsreceivable.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Under st
and
Diff
icult
y:Medium
LearningObjecti
ve:04-05Calcul
atether
equirednewfunds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-12Explanati
onofPr oFormaBalanceSheet
 

44. 
Inthedevel
opmentoftheprof
ormaf
inanci
alst
atement
s,t
hesecondst
epi
nthe
processisthedevel
opmentoft
he:
 
A. 
cashbudget.
B. 
proformabalancesheet
.
C. 
proformaincomestatement
.
D. 
capital
budget.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
02Pr eparethefourf
inanci
alst
atement
sforf
orecast
ingt
heprof
ormai
ncomest
atement
;thepr
ofor
ma
statementofretai
nedear ni
ngs;thecashbudget;andt
heproformabal
ancesheet.
Topic:04-03ProFor maIncomeSt atement
 

45.
 Intheper cent-of-
salesmet hod,adecreasei
ndi
vi
dends:
 
A. 
willi
ncreaser equirednewf unds.
B. 
will
decr easer equirednewfunds.
C. 
hasnoef fectonr equir
ednewf unds.
D. 
mor einformat ionisneeded.

Accessibil
it
y:KeyboardNavigati
on
Blooms:Under st
and
Diff
icult
y:Easy
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

4-
16
Chapt
er04-Fi
nanci
alFor
ecast
ing

46. 
Ifont helastdayofFebruar
ytheactualA/Rbalancewas$12, 000;projectedsal
es
i
nMar chare$50, 000;70%ofsal
esareoncr edi
t;60%ofcreditsalesarecollectedi
n
themont hofsaleand40%ar ecol
lectedi
nthemont hafterthesale,whatist he
proj
ect edA/Rbal anceontheproformabalancesheetfortheendofMar ch? 
A. 
$26,000
B. 
$14,000
C. 
$20,000
D. 
$35, 000

A/
RBal.EndofMarch=A/RBeg.Bal
.+A/Rf
rom Mar
chsal
es
=$12,
000+(40%ofMarchcredi
tsal
es)
=$12,
000+($35,
000.4)=$26,
000.

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mt hespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-14Percent-
of-
Sal
esMet hod
 

47. 
Ifproj
ect
ednetcashfl
owforNov emberi
s($10,000)
;beginni
ngcashbalancei
s
$4,
000; mini
mum cashbal
anceis$3,
000;begi
nningloanbalanceis$8,
000,
whatwill
bethecumul at
ivel
oanbal
anceattheendofNovember ? 
A. 
$14,000
B. 
$5,000
C. 
$17,000
D. 
$22,000

Netcashflow (
$10,000)
+Beginni
ngcashbalance 4,000
Cumulati
vecashbalance (
6,000)
Loan(Repayment) 9,000
Cum.LoanBal . 17,000

Accessibil
it
y:KeyboardNavigati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-05Calcul
atether
equirednewfunds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-12Explanati
onofPr oFormaBalanceSheet
 

4-
17
Chapt
er04-Fi
nanci
alFor
ecast
ing

48. 
Ifproj
ectednetcashfl
owf orJanuar
yis($6,
500);
beginni
ngcashbal
anceis
$16,000;minimum cashbal
anceis$5,000;
beginni
ngloanbalancei
s$4,
500,whatwi
l
l
bethecashbal anceontheproformacashbudgetattheendofJanuary
? 
A. 
$5,000
B. 
$10,000
C. 
$12,000
D. 
$4,500

Netcashflow (
$6,500)
+Beginni
ngcashbalance 16,000
Cumulati
vecashbalance 9,500
Loan(Repayment) (
4,500)
Cum.LoanBal . 0
Endi
ngCash.Bal . $5,000

Accessibil
it
y:KeyboardNavigati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-05Calcul
atether
equirednewfunds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-12Explanati
onofPr oFormaBalanceSheet
 
 

Tr
ue/Fal
seQuest
ions
 

49.
 Ani
ncreaseinsal
esand/
orpr
ofi
tsmeanst
her
eisal
soani
ncr
easei
ncashont
he
bal
ancesheet.
 
FALSE

Accessibil
it
y:KeyboardNavigati
on
Blooms:Under st
and
Diff
icult
y:Easy
LearningObjecti
ve:04-05Calcul
atether
equirednewfunds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-12Explanati
onofPr oFormaBalanceSheet
 

4-
18
Chapt
er04-Fi
nanci
alFor
ecast
ing

50. 
Anincr
easei
nsalesandpr
ofi
tsgener
atest
henecessar
ycashr
equi
redf
or
economicgrowt
h. 
FALSE

Accessibil
it
y:KeyboardNavigati
on
Blooms:Under st
and
Diff
icult
y:Easy
LearningObjecti
ve:04-05Calcul
atether
equirednewfunds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-12Explanati
onofPr oFormaBalanceSheet
 

51.
 Pr
ofi
tisgener
all
yadequat
etof
inancesi
gni
fi
cantgr
owt
h. 
FALSE

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
03Perfor
mthespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-15ActualBudget
 

52.
 Gr
owt
hinsal
esv
olumepr
ecl
udesashor
tageoff
unds.
 
FALSE

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

53. 
Theprimarypur
poseoft
hecashbudgeti
stoal
l
owt
hef
ir
mtoant
ici
pat
etheneed
forout
sidefundi
ng.
 
TRUE

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-09CashReceipts
 

4-
19
Chapt
er04-Fi
nanci
alFor
ecast
ing

54.
 Thepr
imar
ypur
poseoft
hecashbudgeti
stopl
anaccount
spay
abl
epay
ment
s. 
FALSE

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-09CashReceipts
 

55.
 Pr
ofor
mai
ncomest
atement
sfol
l
owasal
esf
orecastandpr
oduct
ionpl
an.
 
TRUE

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
03Perfor
mt hespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-04Establi
shaSal
esPr oj
ecti
on
 

56.
 Pr
ofor
mast
atement
sar
egener
all
ypr
epar
edsi
xmont
hst
oay
eari
ntot
hef
utur
e. 
TRUE

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
02Pr eparethefourf
inanci
alst
atement
sforf
orecast
ingt
heprof
ormai
ncomest
atement
;thepr
ofor
ma
statementofretai
nedear ni
ngs;thecashbudget;andt
heproformabal
ancesheet.
Topic:04-03ProFor maIncomeSt atement
 

57. 
Int
ernalanal
ysi
sforsal
espr
oject
ionsi
nvol
vesexami
ningeconomi
candi
ndust
ry
condit
ions.
 
FALSE

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mt hespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-04Establi
shaSal
esPr oj
ecti
on
 

4-
20
Chapt
er04-Fi
nanci
alFor
ecast
ing

58.
 Compani
esgener
all
ypr
efert
omai
ntai
nsomemi
nimum cashbal
ance.
 
TRUE

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-05Calcul
atether
equirednewfunds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-12Explanati
onofPr oFormaBalanceSheet
 

59. 
Themainconsi
derat
ioni
nconstr
uct
ingtheprof
ormaincomest
atementi
sthe
costsspeci
fi
cal
l
yassoci
atedwi
ththeunit
ssolddur
ingt
heperi
od.
 
TRUE

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Under st
and
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mt hespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-04Establi
shaSal
esPr oj
ecti
on
 

60. 
Thev al
ueofendingi
nventor
yshoul
dbeequal
tobegi
nni
ngi
nvent
orypl
ust
otal
product
ioncost
smi nuscostofgoodssol
d. 
TRUE

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mt hespecif
icaccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-07ActualProFor
maI ncomeStatement
 

61. 
Ifi
nvent
orytur
nov
erisequalt
o3,t
hatmeanst
hatt
hecompanykeepsa
thr
ee-monthsuppl
yofinv
entor
yonhand.
 
FALSE

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
03Perfor
mthespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-06OtherExpenseI
tems
 

4-
21
Chapt
er04-Fi
nanci
alFor
ecast
ing

62. 
Levelpr
oduct
ionschedul
esusual
l
yhav
etheadv
ant
ageofr
educi
ngov
eral
l
product
ioncost
s. 
TRUE

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mthespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-06OtherExpenseI
tems
 

63. 
Theper
cent
-of-
sal
esmethodforfi
nanci
alf
orecast
ingassumest
hatbal
ancesheet
account
smaint
ainaconst
antrel
ati
onshipt
osales.
 
TRUE

Accessibil
it
y:KeyboardNavigati
on
Blooms:Under st
and
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

64.
 Thepercent
-of
-sal
esf
orecasti
sli
kel
ytobemostaccur
atewhenusedwi
thcy
cli
cal
companies.
 
FALSE

Accessibil
it
y:KeyboardNavigati
on
Blooms:Under st
and
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

4-
22
Chapt
er04-Fi
nanci
alFor
ecast
ing

65.
 Asthedi
vi
dendpay
outr
ati
odecl
i
nesmor
eext
ernal
fundsar
erequi
red.
 
FALSE

Accessibil
it
y:KeyboardNavigati
on
Blooms:Under st
and
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

66. 
Thepercent-
of-
sal
esmet
hodwoul
dbemor
eaccur
ateunderast
eadysal
es
assumpti
ont hancycl
i
cal
sal
es.
 
TRUE

Accessibil
it
y:KeyboardNavigati
on
Blooms:Under st
and
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

67.
 Acashbudgetisunnecessar
yunderl
evel
product
ionsi
nceweknowhowmuchwi
l
l
beproducedever
ymont h.
 
FALSE

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Under st
and
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-09CashReceipts
 

68. 
Iti
shelpf
ultobr
eakdownt hei
ncomest at
ementint
osmall
ermont
hlyper
iodst
o
enableev
aluati
onofseasonal
patt
ernsofcashinf
lowsandout
fl
ows.
 
TRUE

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Under st
and
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-09CashReceipts
 

4-
23
Chapt
er04-Fi
nanci
alFor
ecast
ing

69. 
Whensalesv
olumev
ari
esf
rom mont
htomont
hiti
snotadv
isabl
etousel
evel
product
ion.
 
FALSE

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Under st
and
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
herequi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-11ProFor maBal
anceSheet
 

70. 
Prof
ormaincomest
atement
sandbal
ancesheet
sref
ert
opr
oject
edf
inanci
al
stat
ements.
 
TRUE

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
02Pr eparethefourf
inanci
alst
atement
sforf
orecast
ingt
heprof
ormai
ncomest
atement
;thepr
ofor
ma
statementofretai
nedear ni
ngs;thecashbudget;andt
heproformabal
ancesheet.
Topic:04-03ProFor maIncomeSt atement
 

71.
 Apr
oformabal
ancesheetneedsdat
afr
om t
hepr
iorbal
ancesheet
,pr
ofor
ma
i
ncomestat
ementandthecashbudget
. 
TRUE

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
03Perfor
mthespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-13Analysi
sofProFormaStat
ement
 

72.
 Whenafi
nancial
managercalcul
atespr
oducti
onrequi
rementst
heyaddPr
oject
ed
Sal
estodesi
redendingi
nvent
orythensubt
ractbegi
nni
nginvent
ory
. 
TRUE

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mthespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-06OtherExpenseI
tems
 

4-
24
Chapt
er04-Fi
nanci
alFor
ecast
ing

73. 
Theprocessofpr
epari
ngacashbudgetrequi
rest
hef
inanci
almanagert
ransl
ate
theprof
ormai ncomest
atementi
ntocashfl
ows. 
TRUE

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-09CashReceipts
 

74.
 Thepr
imar
ypur
poseoft
hecashbudgeti
stof
orecasti
ncome.
 
FALSE

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-09CashReceipts
 

75.
 Afir
m'scashbor
rowi
ngneedscanber
educedi
fit
sinv
ent
oryt
urnov
err
atecanbe
i
ncreased.
 
TRUE

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Under st
and
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-09CashReceipts
 

76. 
Ani
ncreaseinsal
esaccompani
edbyani ncr
easei
naccount
spay
abl
ewi
l
lreduce
theamountofnewexter
nalfundsr
equi
red.
 
TRUE

Accessibil
it
y:KeyboardNavigati
on
Blooms:Under st
and
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

4-
25
Chapt
er04-Fi
nanci
alFor
ecast
ing

77.
 Al
owerdi
vi
dendpay
outr
ati
owi
l
ldecr
easet
hef
ir
m'sneedf
orbor
rowi
ng.
 
TRUE

Accessibil
it
y:KeyboardNavigati
on
Blooms:Under st
and
Diff
icult
y:Easy
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

78. 
Lowerprof
itmargi
nsresul
ti
ngf
rom i
ncr
easedcompet
it
ionwoul
dmeanal
ower
needforext
ernalf
unds.
 
FALSE

Accessibil
it
y:KeyboardNavigati
on
Blooms:Under st
and
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

79.
 Ahi
ghergr
owt
hrat
einsal
eswi
l
lrequi
remor
eext
ernal
funds.
 
TRUE

Accessibil
it
y:KeyboardNavigati
on
Blooms:Under st
and
Diff
icult
y:Easy
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

4-
26
Chapt
er04-Fi
nanci
alFor
ecast
ing

80. 
Thegener
ati
onofsalesandprof
it
sensurest
hatt
her
ewi
l
lbeadequat
ecashon
handtomeetfi
nanci
alobli
gati
onsastheycomedue.
 
FALSE

Accessibil
it
y:KeyboardNavigati
on
Blooms:Under st
and
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

81.
 Sal
espr
oject
ionsandtheabi
l
ityt
oaccur
atel
ypr
edi
ctt
hef
utur
ehav
eal
arge
i
mpactoncashflowtarget
s. 
TRUE

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Under st
and
Diff
icult
y:Easy
LearningObjecti
ve:04-
03Perfor
mt hespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-04Establi
shaSal
esPr oj
ecti
on
 

82.
 Pr
oformaincomest
atement
sant
ici
pat
esal
es,
expenses,
incomeandcostof
goodssol
d. 
TRUE

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Remember
Diff
icult
y:Easy
LearningObjecti
ve:04-
03Perfor
mt hespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-04Establi
shaSal
esPr oj
ecti
on
 
 

Shor
tAnswerQuest
ions
 

4-
27
Chapt
er04-Fi
nanci
alFor
ecast
ing

83.
 Strat
egi
cplanni
ngandthefi
nanci
alplanni
ngpr
ocessusual
l
yinv
olv
e4st
eps.Li
st
i
nor derandbr
iefl
ydescr
ibet
hese4steps. 

Thinki
ng.Considerati
onoft hefirm'scurrentbusinesses,aswel l
asitschal
lengesand
opport
unit
ies.Carefulcol
lecti
onofdat aandanal ysi
sisrequired.
Decisi
ons.Keydi r
ecti
ons, str
ategicresourcecommi tments,andbusinessmodels
evol
ve.Fi
nanceshoul dplayani mpor tantrol
eev aluat
ingalter
nativesbymodelli
ng
assetval
uesandr iskwithlong-term objecti
ves.
Planni
ng.Priori
ti
es,objecti
ves,andout comesar eestabl
ished.Financi
alpl
ansand
budgetsaredevelopedwi t
hshor t-
term objecti
ves.
Perfor
mance.Wor kplansandmoni tori
ng.

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
01Explai
nwhyfi
nanci
alf
orecast
ingi
sessent
ialf
ort
heheal
thygr
owt
hoft
hef
ir
m.
Topic:04-02Construct
ingPr
oFor maSt
atement
s
 

84. 
Withoutr
eali
sti
cfi
nanci
alf
orecast
s,t
hesmal
lbusi
nessi
npar
ti
cul
arwi
l
lli
kel
y
experi
encewhich4probl
ems? 

Haveli
quidit
yproblems
Demonstratepoormanagementplanni
ngandcont
rol
measur
es
Havedif
fi
cultysecuri
ngbusinessl
oans
Facepossibl
ebusinessfai
l
ur e

Accessibil
it
y:KeyboardNavigati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
02Pr eparethefourf
inanci
alst
atement
sforf
orecast
ingt
heprof
ormai
ncomest
atement
;thepr
ofor
ma
statementofretai
nedear ni
ngs;thecashbudget;andt
heproformabal
ancesheet.
Topic:04-03ProFor maIncomeSt atement
 

4-
28
Chapt
er04-Fi
nanci
alFor
ecast
ing

85.
 Whatar
ethe4st
epsi
ndev
elopi
ngapr
ofor
mai
ncomest
atement
? 

1.Est
ablishasalesproject
ion.
2.Det
ermi neaproductionschedul
eandt
heassoci
ateduseofnewmat
eri
al,
dir
ect
l
abour,andov er
headt oarr
iveatgr
osspr
ofi
t.
3.Comput eotherexpenses.
4.Det
ermi neprofi
tbycompl et
ingt
heact
ualpr
ofor
mast at
ement.

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Remember
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mt hespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-04Establi
shaSal
esPr oj
ecti
on
 

86.
 Expl
ainhowt
obestder
iveasal
espr
oject
ion.
 

Salesprojectionsar ebestderi
vedfr
om bothanext ernalandani nternal vi
ewpoint.
Usingthef ormer, weanalyzeourprospect
ivesal esinlightofeconomi cconditi
ons
aff
ectingouri ndustryandourcompany .St
atisti
cal t
echni quessuchasr egressi
onand
ti
meser iesanal y
sismaybeempl oyedinthepr ocess.Internalanalysiscallsforthe
salesdepar tmentt osurveyourownsalespeoplewi thintheirt
erri
tories.Ideall
y,we
wouldpr oceedal ongeachoft hosepathsinisolati
onoft heot herandt henassi mil
ate
theresultsintoonemeani ngf
ulproj
ecti
on.

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Remember
Diff
icult
y:Hard
LearningObjecti
ve:04-
03Perfor
mt hespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-04Establi
shaSal
esPr oj
ecti
on
 

4-
29
Chapt
er04-Fi
nanci
alFor
ecast
ing

87. Thecostofoil
isv
eryimport
antinproj
ect
ingmanufactur
ing,tr
ansportat
ion,and
producti
oncostsofacompany.Howwoul dyouproposereducingrel
ianceonv ari
abl
e
oi
l pri
cestoimprovef
inanci
alf
orecast
ing?
 

Answerswi l
lvarybutcoul
dincl
udeseekingal
ternati
vesources(
natur
algas,propane,
sol
ar,geothermal,hy
bri
dvehicl
es)
,long-
ter
m oil
pr i
cecontr
acts,
hedgingfundsfor
fut
ureoilpurchases.

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Under st
and
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-10CashPay ment
s
 

88.
 Thef
oll
owi
ngi
sthebal
ancesheetf
or20X5f
orMar
bel
lInc.

Marbell
Inc.
Bal
anceSheet
asatDecember31, 20X5
Asset s  Li
abili
ti
es  
Cash $15,
500Account sPay abl
e $90,
000
Accts.Rec 90,
000Not esPayable 30,
000
I
nv entory 60,
000Accr uedExpenses 7,
500
CurrentAssets 165,
000Cur rentLi
abil
iti
es 127,
500
Fixedassets 60,
000Commonst ock 75,
500
(non-spontaneous)
   Ret
ainedearni
ngs 22,
500
TotalAssets $225,
000Tot
alLiabi
l
iti
es+S.HEqui
ty $225,
000

4-
30
Chapt
er04-Fi
nanci
alFor
ecast
ing

Salesf
or20X5wer e$500,000.Sal
esf or20X6havebeenpr oj
ectedtoi
ncr
easeby10%.
AssumingthatMarbell
Inc.isoperat
ingbel owcapaci
ty,
calcul
atetheamountofnew
fundsrequi
redtofi
nancethisgrowth.Mar bel
lhasan8%r etur
nonsalesand80%i s
paidoutasdivi
dends.
 

PercentofSalesTabl
e
Cash 5%Accts,Pay abl
e 30%
Accts.Rec. 30%Accruedexpenses 2.
5%
I
nv entor
y 20%   
CurrentAssets 55%CurrentLiabil
i
ties 32.
5%
(spontaneous) (spontaneous)

I
ncreasedsales=10%( 500,000)=$50,000
NewSal esl
evel=500,000+50, 000=$550, 000
Newf undsr
equi r
ed=[(A/S1)(S)]-[
(L/S)(
S)]-PS2(
1-D)
Newf unds=55%( 50,
000)-
32.5%(50,000)-
8%(550,
000)(
1-8)
Requir
ed=27. 500-16.250-8,800
=$2,450

Accessibil
it
y:KeyboardNavigati
on
Blooms:Appl y
Diff
icult
y:Hard
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

89.
 TheAmberMagicShoppehasfor
ecasti
tssal
esr
evenuesandpur
chasesf
ort
he
l
ast5monthsof20X9tobeasf ol
l
ows:

Sal
es Purchases
August $25,
000 $17,000
September 15,
000 19,5000
October 25,
000 29,000
November 30,
000 20,000
December 26,
000 24,000

4-
31
Chapt
er04-Fi
nanci
alFor
ecast
ing

65%ofsal esar eoncr edi

t.Onthebasisofpastexper i
ence,50%oftheaccounts
receivabl
ear ecol
lectedthemont hafterthesaleandtheremainderarecol
lect
ed2
mont hsafterthesale.Purchasesarepaid30day saft
ertheyarei
ncurr
ed.Thefir
mhad
acashbal anceof$5, 000asofSept ember30t h,andi
tsmi ni
mum requir
edcash
balanceis$4,000.Ithadnobegi nni
ngloanbalance.PrepareacashbudgetforOctober
,
Nov emberandDecember . 

AugustSept
ember OctoberNov
emberDecember
Sales $25,000 $15,000 $25,000 $30,
000 $26,000
           
Credit(65%) $16,250 9,
750 16, 250 19,
500 16,
900
           
Collecti
on:     $8, 750 $10,
500 $9,
100
Cashsal es          
50%i nf ollowing     4,875 8,
125 9,
750
mont h
50%i nsecondmont h     8,
125 4,875 8,
125
      $21,
750 $23,500 $26.
975
           
CashBudget     $21,
750 $23,500 $26.
975
Collecti
ons     19,500 29,000 20,
000
-Payment s     $2,250 $(
5,500) $6,975
CashFl ow     5,
000 7,250 4,
000
+Begi nni ngCash     $7250 $1,750 $10,
975
Balance
Cumul ativ eCash          
Balance
           
Loan( repay ment )     $0 $2.
250 $(
2.250)
Cumul ativ eLoan     0 2.
250 0
Balance
EndingCashBal ance     $7,
250 $4,
000 $8,
725

4-
32
Chapt
er04-Fi
nanci
alFor
ecast
ing

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Appl y
Diff
icult
y:Hard
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-10CashPay ment
s
 

90.
 El
l
isSpor
tShoppr
oject
sthef
oll
owi
ngsal
es:

Apri
l May June
$75,000 95,
5000 $110,
000

NinetypercentofEl l
is'sal
esareoncredi
twit
h60percentofreceiv
ablescoll
ectedi
n
themont hafterthesal eandtherestofr
ecei
vabl
escol
lectedinthesecondmont h
aft
erthesale. Februarysaleswer
e$60,000andMarchsaleswere$70,000.Inthepast
Ell
is'
baddebtper centagehasbeen0andt hi
srat
eisexpectedtocontinue.

A)Pr
epar
eamont hl
yschedul
eofcashr
ecei
ptsf
orApri
l-
June.
B)Whati
sthebal
anceofRecei
vabl
esatt
heendofJune? 

A)

AugustSept
ember OctoberNov
emberDecember
Sales $60,000 $70,000 $75,000 $95,
000 $110,
000
CreditSal es 5400 63,
000 67, 500 85,
500 99,
000
Collections:          
Cash          
(10%ofSal es) 6,000 7,
000 7,500 9,
500 11,
000
60%f irstmont haf
ter     37, 800 40,
500 51,
300
sale
40%secondmont h     21,
600 25,
200 27,
000
after
Tot alReceipts     $66.
900 $75,
200 $89,
300

4-
33
Chapt
er04-Fi
nanci
alFor
ecast
ing

B)Recei
vabl
esEndofJune:

90%ofJuneSal
es $99,
000
40%ofMayCredi
tSal
es 34,
300
  $133,
200

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-10CashPay ment
s
 

91. 
Eddi
e'sBarandRest
aur
antSuppl
i
esexpect
sit
srev
enuesandpay
ment
sfort
he
fi
rstpar
toftheyeart
obe:

Sal
es Purchases
Jan. $14,
000 $81,000
Feb. 20,
000 21,300
Mar. 26,
000 19,100
Apri
l
. 22,
000 22,400
May 18,
000 14,700

4-
34
Chapt
er04-Fi
nanci
alFor
ecast
ing

Sevent ypercentofthefir
m'ssalesareoncredit
.Pastexperi
enceshowst hat40
percentofaccount srecei
vablearecoll
ect
edinthemonthaf t
ersal
e,andtheremainder
arecol l
ectedinthesecondmont haf t
ersal
e.Prepar
easchedul eofcashreceipt
sfor
Mar ch,April
,andMay .Eddie'
spaysitspaymentsinthefol
lowingmonth.Eddie'
shada
cashbal anceof$2,000onMar ch1,whichisal
soitsminimum requi
redcashbalance.
Ther eisanout st
andingloanof$2,000onMar ch1.Prepareacashbudgetf orMarch,
April,andMay . 

Jan Feb Mar ch Apri

l May
Cash $4,
200 $6,
000 $7, 800 $6,600 $5,
400
Credit 9,
800 14,
000 18, 200 15,400 12,
600
           
Coll
ections:          
           
Cash     7,800 6,600 5,
400
40%i nfollowingmonth     5,600 7,280 6,
160
60%i nsecondmont h     5,880 8,400 10,
920
TotalCollecti
ons     $19,280 $22,280 $22,
480
           
CashBudget :          
           
Coll
ections     $19,280 $22,280 $22,
480
-Payment s     21, 300 19,100 22,
400
CashFl ow     (
20,020) 3.180 80
+Beg.CashBal .     2,000 2,000 2,
000
Cum.CashBal .     (20) 5,180 2,
080
Loan( Repay ment)     2,020 (
3,180) (
80)
Cum.LoanBal .     4,020 840 760
EndingCashBal .     $2, 000 $2,000 $2,
000

Accessibil
it
y:KeyboardNavigati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-05Calcul
atether
equirednewfunds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-12Explanati
onofPr oFormaBalanceSheet
 

4-
35
Chapt
er04-Fi
nanci
alFor
ecast
ing

92.
 Fr
ank'
sSpor
ti
ngGoodspr
oject
ssal
esf
ort
hesecondquar
terof20X5t
obeas
fol
l
ows:

Apr
il$100,
000May$120,
000June$110,
000

TenpercentofFr
ank'
ssalesareforcash,70%ofaccountsr
ecei
vabl
earecoll
ect
edone
monthfoll
owingthesal
e,andt herestarecoll
ect
edtwomonthsfol
l
owingthesale.
Januar
ysaleswere$40,000,Februarysaleswere$60,
000,
andMarchsaleswere
$80,
000.

A)Pr
epar
eamont hl
yschedul
eofcashrecei
ptsf
orthesecondquart
erof20X5.
B)Whati
sthebal
anceinaccount
srecei
vabl
eattheendofJune? 

A)

Feb Mar Apr May Jun

Sales $60,
000 $80,
000 $100,
000 $120,
000 $110,
000
CreditSales 54,
000 72,000 90, 000 108,000 99, 000
Collect
ions:          
           
Cash( 10%ofSales)     10, 000 12, 000 11,
00
70%f ir
stmonthafter     50, 400 63, 000 75, 600
sale
30%secondmont haft
er     16,200 21,600 27, 000
Mont hl
ycashreceipt
s     $76,
600 $96,
600 $113,
600

B)Account
srecei
vabl
eatendofJune:

90%ofJuneCr editSales $99,

000
30%ofMayCr editSales 32,
400
Tot
alRecei
vablesBal ance 131,
400

4-
36
Chapt
er04-Fi
nanci
alFor
ecast
ing

Accessibil
it
y:KeyboardNav
igati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-10CashPay ment
s
 

93.
 Dur
ing20X5,
BakerCompanyandBaumerCompanymadet
hef
oll
owi
ngi
dent
ical
pur
chases:

September1st100uni
ts@ $10.00
October1st200uni
ts@ $10.
50
st
November1 200uni t
s@ $11.50
December1st100unit
s@ $12.00

4-
37
Chapt
er04-Fi
nanci
alFor
ecast
ing

OnDecember31steachcompanysol d400unit
s,butBakerusesAv erageCost
i
nventoryval
uati
onandBaumerusesFI FOinv
entor
yv al
uati
on.Assumet herewasno
begi
nninginvent
ory.Calcul
atecostofgoodssol
dandendi ngi
nvent oryf
oreach
company .Howwill
t hediff
erencei
ncostofgoodssoldaff
ectnetincome?  

  Baker    Baumer  
(Avg) (FI
FO)
Begi
nning   $0     $0  
i
nventory
+purchases            
  100@ 1,
000     1,
000  
$10.
00
  200@ 2,
100     2,
100  
$10.
50
  200@ 2,
300     2,
300  
$11.
50
  100@ 1,
200     1,
200  
$12.
00
Goodavai
labl
efor     $6,
600     $6,
600
sale
-Endi
ngi
nvent
ory 200@ $2,
200   100@ $1,200  
$11.
00 $12.
00
        100@ 1,
150  
$11.
50
      2,200     2,350
CostofGoods     $4,
400     $4,
250
Sol
d

Lowercostofgoodssol
dunderFI
FOgener
atesahi
ghergr
ossmar
ginandneti
ncome,
othert
hingsbei
ngequal
.

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-
03Perfor
mthespeci
fi
caccount
smet
hodandt
heper
cent
-of
-sal
esmet
hodf
orf
orecast
ingona
l
ess-precisebasi
s.
Topic:04-06OtherExpenseI
tems
 

4-
38
Chapt
er04-Fi
nanci
alFor
ecast
ing

94.
 TheAmberMagickShoppehasfor
ecasti
tssal
esr
evenuesandpur
chasesf
ort
he
l
ast5monthsof20X5tobeasf ol
l
ows:

Sal
es Purchases
August $22,
000 $17,000
September 15,
000 19,500
October 25,
000 29,000
November 30,
000 20,000
December 26,
000 24,000

Sixt
ypercentofsalesareoncredit
.Ont hebasi
sofpastexperience,50%ofthe
accountsrecei
vabl
earecoll
ectedt hemont haf
terthesal
eandt heremainderar
e
coll
ected2mont hsaft
erthesale.Purchasesarepaid30daysaftertheyarei
ncurr
ed.
Thefirm hasacashbalanceof$5,000onhandasofOct ober31,butitsmini
mum
requi
redcashbalanceis$4,000

A)Pr
epar
easchedul
eofcashrecei
ptsf
orOct
ober
,Nov
ember
,andDecember
.
B)Pr
epar
eacashbudgetf
orthesameperi
od.
 

AugustSept
ember OctoberNov
emberDecember
Cash $8,800 $6000 $10,000 $12,
000 $10,400
Credi
t 13,200 9,
000 15, 000 18,
000 15,
600

4-
39
Chapt
er04-Fi
nanci
alFor
ecast
ing

Coll
ections     OctoberNov
emberDecember
           
CashSal es     $10,000 $12, 000 $10,400
50%i nfoll
owingmonth     4,500 7,500 9,000
50%i nsecondmont h     6,600 4,500 7,500
Totalcoll
ecti
ons     $21,100 $24, 000 $26,900
           
           
CashBudget          
Coll
ections     $21,100 $24, 000 $26,900
-payment s     19,500 29, 000 20,000
CashFl ow     $1,600 $(5,000) $6, 900
+BeginningCashBalance    5,000 6,600 4,000
Cumul ati
veLoanBalance    $6,600 $1, 600 $10,900
           
Loan( Repayment)     $0 $2, 400 $(
2,400)
Cumul ati
veLoanBalance    0 400 0
EndingCashBal ance     $6,600 $4, 000 $8,500

Accessibil
it
y:KeyboardNavi
gati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-
05Calcul
atet
her
equi
rednewf
unds(
RNF)andsust
ainabl
egr
owt
hrat
e(SGR)
.
Topic:04-09CashReceipts
 

95.
 Thef
oll
owi
ngi
sthebal
ancesheetf
or20X5f
orMar
bel
lInc.

4-
40
Chapt
er04-Fi
nanci
alFor
ecast
ing

Marbell
Inc.
Bal
anceSheet
asatDecember31, 20X5
Asset s   Li
abili
ti
es  
Cash $15,
500Account sPay abl
e $90,
000
Accts.Rec 90,
000Not esPayable 30,
000
I
nv entory 60,
000Accr uedExpenses 7,
500
CurrentAssets 165,
000Cur rentLi
abil
iti
es 127,
500
Fixedassets 60,
000Commonst ock 75,
500
(non-spontaneous)
   Ret
ainedearni
ngs 22,
500
TotalAssets $225,
000Tot
alLiabi
l
iti
es+S.HEqui
ty $225,
000

Salesf
or20X5wer e$300,000.Sal
esf or20X6havebeenpr oj
ectedtoi
ncr
easeby20%.
AssumingthatMarbell
Inc.isoperat
ingbel owcapaci
ty,
calcul
atetheamountofnew
fundsrequi
redtofi
nancethisgrowth.Mar bel
lhasan8%r etur
nonsalesand70%i s
paidoutasdivi
dends.
 

Per
centofSalesTable
Sal
es=20%( 300,000)=$60,000
Newsalesl
ev el=300,000+60,000=$360,000
RNF=(A/S1)(S)-(L/S1)
(S)-(PS1)(
1-D)
RNF=55%( 60,000)-32.
5%(60,
000)-8%(360,000)
(1-
0.7)
RNF=33,600-19, 500-8,
640
RNF=$4,860

Accessibil
it
y:KeyboardNavigati
on
Blooms:Appl y
Diff
icult
y:Medium
LearningObjecti
ve:04-04Determi
netheneedfornewf
undingresul
ti
ngf
romsal esgr
owt
h;whil
egivi
ngconsi
der
ati
ont
oseasonal
andot hereff
ectsoncashf l
ow.
LearningObjecti
ve:04-05Calcul
atet
herequi
rednewfunds(RNF)andsust
ainablegr
owt
hrate(SGR).
Topic:04-16SustainableGr
owt hRat
e
 

4-
41