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Exam 11: Forecasting Financial Requirements

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Question 31

True/False

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Many small firms have a tendency to underestimate the amount of capital the business requires when beginning operations.

A) True
B) False

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Question 32

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The assets-to-sales relationship tends to be relatively constant within an industry, allowing for a(n) _____ technique to be utilized in projecting asset requirements.

A) percentage-of-sales
B) bootstrap forecasting
C) asset turnover ratio
D) discounted sales

E) None of the above
F) A) and B)

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Question 33

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Marcia like to use other people's money when financing her business. In this way she "does more with less" by controlling resources without actually owning them.

D&R Products forecast a first year asset requirement of $143,500; therefore, the total debt requirement is

Zeno had a great idea but no cash so he asked the bank for a loan to finance the entire operation. It seems he forgot that a bank would never provide _______ % of the firm's financing.

What are the categories that constitute working capital versus net working capital?

Natasha has been in business for a little over a year with her Sips and Munchies Coffee Shop where she sells an array of coffees and pastries. She rents a building with a downtown location and manages the business and employees herself. Discuss factors that drive the company's profits.

Andrea is working on forecasting her financial statements for her consulting business. Discuss three suggestions for Andrea to make her forecasting more effective.

The cost of goods sold can be either fixed or variable.

Match the term with its definition. -Short-term debts, such as accounts payable, that automatically increase in proportion to a firm's sales

Fixed assets include

Cash flow can be projected in two ways: using the income statement to project cash flows or preparing a cash budget.

Bowz 4 Kidz is a new business that Ellie has started out of her home utilizing an online business model. In developing pro forma financials, what general questions do the statements need to answer and how will they be applied to Ellie's business?

Mario has high hopes for his new business, anticipating a very large profit margin. For the preparation of his forecasts, he should use industry averages regardless of his hopes.

David has a company decorating houses for the holidays. He has secured a $25,000 line of credit from his bank. For which purpose is David more likely to use this credit line?

Explain the percentage-of-sales technique. Will this technique differ by industry type?

For the typical small firm, the primary source of equity capital for financing growth is

Match the term with its definition. -Current assets less current liabilities

The cash budget is concerned only with dollars received and dollars paid out.

Miriam wants to make sure she does not run out of cash so she is preparing a monthly cash budget. The first step is: