FIN 534 Problems Chapter 16 Financial Planning and Forecasting

FIN 534 Problems Chapter 16 Financial Planning and Forecasting

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Unformatted text preview: Problems Chapter 16: Forecasting Multiple Choice: Conceptual (16-1) Strategic planning C K Answer: c EASY 16. Which of the following is NOT a key element in strategic planning as it is described in the text? a. The mission statement. b. The statement of the corporations scope. c. The statement of cash flows. d. The statement of corporate objectives. e. The operating plan. (16-3) AFN formula method C K Answer: b EASY 17. Which of the following assumptions is embodied in the AFN formula? a. All balance sheet accounts are tied directly to sales. b. Accounts payable and accruals are tied directly to sales. c. Common stock and long-term debt are tied directly to sales. d. Fixed assets, but not current assets, are tied directly to sales. e. Last years total assets were not optimal for last years sales. (16-3) Additional funds needed C K Answer: a EASY/MEDIUM 18. Jefferson City Computers has developed a forecasting model to estimate its AFN for the upcoming year. All else being equal, which of the following factors is most likely to lead to an increase of the additional funds needed (AFN)? a. A sharp increase in its forecasted sales. b. A sharp reduction in its forecasted sales. c. The company reduces its dividend payout ratio. d. The company switches its materials purchases to a supplier that sells on terms of 1/5, net 90, from a supplier whose terms are 3/15, net 35. e. The company discovers that it has excess capacity in its fixed assets. (16-3) Additional funds needed C K Answer: b EASY/MEDIUM 19. The term additional funds needed (AFN) is generally defined as follows: a. Funds that are obtained automatically from routine business transactions. b. Funds that a firm must raise externally from non-spontaneous sources, i.e., by borrowing or by selling new stock, to support operations. c. The amount of assets required per dollar of sales. d. The amount of internally generated cash in a given year minus the amount of cash needed to acquire the new assets needed to support growth. e. A forecasting approach in which the forecasted percentage of sales for each balance sheet account is held constant. (16-3) Capital intensity ratio C K Answer: e EASY/MEDIUM 20. The capital intensity ratio is generally defined as follows: a. Sales divided by total assets, i.e., the total assets turnover ratio.Chapter 16: Forecasting Problems Page 667 b. The percentage of liabilities that increase spontaneously as a percentage of sales....
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This note was uploaded on 01/14/2012 for the course FIN 534 taught by Professor Nalla during the Spring '08 term at Strayer.

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FIN 534 Problems Chapter 16 Financial Planning and Forecasting

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