In the percent-of-sales forecasting method, all of the following balance sheet and income statement items are
assumed to increase proportionately with sales EXCEPT:
Pro forma financial statements are used to:
Cash budgeting can be employed effectively by management to
The first step in cash budget preparation is the
Computerized financial planning models may be classified as any of the following except:
Pro forma financial statements show the results of some ____ event rather than a (an) ____ event
Peerless believes that its sales next year will increase 20 percent from the current level of $800,000.
Management calculates that assets must increase $110,000 to support the new sales level, and current
liabilities will increase $70,000. What total financing will be needed?
Calculate United’s total assets if the firm expects sales to grow 15 percent this year and the earnings after tax
will be $50,000. United paid $20,000 in dividends last year and expects to increase dividends 10 percent this
year. The firm will need additional financing of $25,000 to finance the expected growth. United started the
year with $40,000 in accounts payable; $30,000 in notes payable; and $100,000 in long-term debt. The
company is operating at full capacity.
The financial statement that shows the effects of a company’s operating, investing, and financing activities on
its cash balance is known as the:
The Financial Accounting Standard Board (FASB) requires companies to prepare their statement of cash
flows using the:
Which of the following shows the effects of a company’s operating, investing, and financing activities on its
The Hudson River Line Company has a balance sheet as of the end of the year as follows:
Cash $ 5,000 Accounts Payable $ 15,000
Accounts Receivable 20,000 Notes Payable 10,000
Inventories 40,000 Total Current Liab. 25,000
Total Current Assets $ 65,000 Long-term Debt 30,000
Fixed Assets, net 50,000 Stockholder’s Equity 60,000
Total Assets $115,000 Total Liabilities & Equity $115,000
Last year, the firm had sales of $148,750. This year the company expects sales to increase 25%, to generate
earnings after tax of $16,000, and to pay a dividend of $5,000. Hudson operated its fixed assets at 85%
capacity last year. What additional financing will be needed to support the sales increase?
Which of the following is an example of a deterministic model?
Short-term operational plans are generally conducted over what time frame?
The first step in the preparation of a cash budget is:
The values shown in ordinary annuity tables (either present value or compound value) can be adjusted to the
annuity due form by ____ the ordinary annuity interest factor by ____.
An annuity due is one in which
The effective rate of interest will always be ____ the nominal rate.
Comet Powder Company has purchased a piece of equipment costing $100,000. It is expected to generate a
ten-year stream of benefits amounting to $16,273 per year. Determine the rate of return Comet expects to earn
from this equipment.
You sold 100 shares of stock today for $30 per share that you paid $20 for 6 years ago. Determine the average
annual rate of return on your investment, assuming the stock paid no dividends.
Designs Now is opening a showcase office to display and sell it’s computer designed poster art. Designs
expects cash flows to be $120,000 in the first year, $180,000 in the second year, $240,000 in the third year. If
Designs uses 11 percent as its discount rate, what is the present value of the cash flows?
Joe Brady just won a $450,000 lottery in Pennsylvania. Instead of receiving a lump sum, he found that he
would receive $22,500 annually (end of year) for 20 years. Joe is 75 years old and wants his money now. He
has been offered $140,827 to sell his ticket. What rate of return is the buyer expecting to make if Joe accepts
Your brother, who is 6 years old, just received a trust fund that will be worth $25,000 when he is 21 years old.
If the fund earns 10 percent interest compounded annually, what is the value of the fund today?
A zero coupon bond with a $1,000 par value is selling for $356 and matures in 12 years. What is the implied
discount rate (yield to maturity)?
Your local bank offers 4-year certificates of deposit (CD) at a 12 percent annual nominal interest rate
compounded quarterly. Determine how much additional interest you will earn over 4 years on a $10,000 CD
that is compounded quarterly compared with one that is compounded annually.
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