Chapter 04 – Financial Forecasting
61. Wiggles Right forecasted sales of $5,000 in October, $4,000 in November and $4,000 in
December. All sales are on credit. 40% is collected the month of sale and the remainder the
following month. How much is collected from accounts receivable in November?
Chapter 04 – Financial Forecasting
62. GS Cookie Co. forecasts cash receipts for January and February of $18,000 and $20,000,
respectively. Cash Payments of $6,000 and $8,000 are expected in these two months. GS
Cookie’s cash balance at the beginning of January was $5,000, a level that it attempts to
maintain. At the beginning of the year, GS Cookie has a $15,000 balance outstanding on its
line of credit at the local bank. Based on its cash budget, how much of the line of credit can
GS Cookie repay in January and February?
63. In the construction of the cash payments schedule, the major cash payment is generally
Chapter 04 – Financial Forecasting
64. The difference between total receipts and total payments is referred to as
65. Net cash flow is equal to:
66. In developing data for accounts receivable for the pro forma balance sheet, the analyst is
most likely to turn to the:
Chapter 04 – Financial Forecasting
67. In a cash budget, the cumulative cash balance is equal to:
68. Which of the following is most likely to increase the final number for notes payable in the
pro forma balance sheet?
69. The percent-of-sales method of financial forecasting
Chapter 04 – Financial Forecasting
70. A firm has targeted a 20% growth in sales this year. Last year’s cash as a percent of sales
was 10%, accounts receivable 30%, and inventory 25%. What percentage growth in current
liabilities is required to support the growth in sales under the percent-of-sales forecasting
method?
71. In the percent-of-sales method, an increase in dividends
72. In the percent-of-sales method, if (A/S) and (L/S) both increase:
Chapter 04 – Financial Forecasting
73. In forecasting a firm’s cash needs for some future period
74. In the percent-of-sales method
75. When using the percent-of-sales method in forecasting funds needed, which of the
following is not true?
Chapter 04 – Financial Forecasting
76. BHS Inc. determines that sales will rise from $400,000 to $550,000 next year.
Spontaneous assets are 60% of sales and spontaneous liabilities are 40% of sales. BHS has an
8 % profit margin and a 40% dividend payout ratio. What is the level of required new funds?
77. Firms that successfully increase their rates of inventory turnover will, among other things,
Chapter 04 – Financial Forecasting
78. If Excel Inc. has projected sales of $30,000 in January, $20,000 in February, and $20,000
in March; 80% of sales are on credit; 20% are collected in the month of sale and 80% are
collected the month after, what are cash receipts in March?
Chapter 04 – Financial Forecasting
79. If the actual December 31st A/R balance was $12,000; projected sales in March are
$50,000; 70% of sales are on credit; 60% of credit sales are collected in the month of sale and
40% are collected in the month after the sale, what is the projected A/R balance on the
proforma balance sheet for the end of March?
80. If projected net cash flow for November is ($10,000); beginning cash balance is $4,000;
minimum cash balance is $3,000; beginning loan balance is $8,000, what will be the
cumulative loan balance at the end of November?
81. If projected net cash flow for January is ($6,500); beginning cash balance is $16,000;
minimum cash balance is $5,000; beginning loan balance is $4,500, what will be the cash
balance on the proforma cash budget at the end of January?
82. Match the following with the items below:
2. pro forma income
During a given time period, those costs specifically
3. pro forma balance
A series of monthly or quarterly detailed plans that
indicate cash receipts, cash payments, and the necessary
borrowing requirements to meet the firm’s financial
A projection of future asset, liability, and
5. percent-of-sales
The determination of the relationships of various asset
and liability accounts to sales and the corresponding
changes that result in the asset and liability accounts
Chapter 04 – Financial Forecasting
83. Ellis Sport Shop projects the following sales:
Seventy percent of Ellis’ sales are on credit with 60 percent of receivables collected in the
month after the sale and the rest of receivables collected in the second month after the sale.
February sales were $60,000 and March sales were $70,000. In the past Ellis’ bad debt
percentage has been 0 and is expected to continue.
a) Prepare a monthly schedule of cash receipts for April-June.
b) What is the balance of Receivables at the end of June?
Chapter 04 – Financial Forecasting
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84. Eddie’s Bar and Restaurant Supplies expects its revenues and payments for the first part of
the year to be:
Eighty percent of the firm’s sales are on credit. Past experience shows that 40 percent of
accounts receivable are collected in the month after sale, and the remainder is collected in the
second month after sale. Prepare a schedule of cash receipts for March, April and May.
Eddie’s pays its payments in the following month. Eddie’s had a cash balance of $2,000 on
March 1, which is also its minimum required cash balance. There is an outstanding loan of
$6,000 on March 1. Prepare a cash budget for March, April, and May.
Chapter 04 – Financial Forecasting
85. Frank’s Sporting Goods projects sales for the second quarter of 20XX to be as follows:
April $100,000 May $120,000 June $110,000
20% of Frank’s sales are for cash, 70% of accounts receivable are collected one month
following the sale, and the rest are collected two months following the sale. January sales
were $40,000, February sales were $60,000, and March sales were $80,000.
a) Prepare a monthly schedule of cash receipts for the second quarter of 20XX.
b) What is the balance in accounts receivable at the end of June?
Chapter 04 – Financial Forecasting
86. During 20XX, Baker Company and Baumer Company made the following identical
purchases:
100 units @ $12.50
200 units @ $10.50
200 units @ $11.00
100 units @ $12.00
Each company sold 500 units, but Baker uses LIFO inventory valuation and Baumer uses
FIFO inventory valuation. Assume there was no beginning inventory. Calculate ending
inventory and cost of goods sold for each company. How will the difference in cost of goods
sold affect net income?
Chapter 04 – Financial Forecasting
87. The Amber Magic Shoppe has forecast its sales revenues and purchases for the last 5
months of 200x to be as follows:
Chapter 04 – Financial Forecasting
Chapter 04 – Financial Forecasting
88. The following is the balance sheet for 2010 for Marbell Inc.
Chapter 04 – Financial Forecasting