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80. Suppose a firm was planning to greatly reduce its raw materials inventory next year by
introducing just-in-time inventory control procedures. Assuming no other changes to the firm's
operations, what would this do to AFN?
81. Which of the following statements is correct?
82. Suppose you were forecasting sales for a firm that exhibited a cyclical pattern within
each week. How would you go about forecasting sales for this firm?
83. Explain when it is appropriate to use the naїve, average, and seasonality- and trend-
adjusted approaches to forecasting sales.
84. Articulate the rationale of the additional funds needed approach to estimating the need
for a firm to seek external financing.
85. Is forecasting more important for small firms or large firms? Why?
86. Which liabilities would tend to spontaneously increase with sales? Why?
87. Suppose that the 2013 actual and 2014 projected financial statements for CMT Corp. are
initially as shown in the following tables. In these tables, sales are projected to rise 35 percent in
the coming year, and the components of the income statement and balance sheet that are
expected to increase at the same 35 percent rate as sales need to be calculated and are
indicated with a blank space (___). Assuming that CMT Corp. wants to cover the AFN with 30
percent equity, 35 percent long-term debt, and the remainder from notes payable, what amount
of additional funds will they need to raise if debt carries a 9 percent interest rate?
88. The financial plan is an important element in the process of strategic planning. What
does strategic planning involve?
89. How is the capital intensity ratio calculated? How is it used in the AFN formula?
90. What are two issues that are not addressed regarding fixed assets if one simply uses the
AFN formula in its simplest form? How would they impact the AFN calculation?
91. Explain the process of financial planning process of a firm.
92. Contrast the difference between first order effects and higher order effects when
forecasting financial statements.
