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Exam 4: Cash Flow and Financial Planning

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Question 31

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Pro forma statements are used for

A) cash budgeting.
B) credit analysis.
C) profit planning.
D) leverage analysis.

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Question 32

Multiple Choice

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Cash flows that result from debt and equity financing transactions, including incurrence and repayment of debt, cash inflows from the sale of stock, and cash outflows to pay cash dividends or repurchase stock are called

A) operating flows.
B) investment flows.
C) financing flows.
D) none of the above.

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Question 33

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Utilizing past cost and expense ratios (percent-of-sales method) when preparing pro forma financial statements will tend to

All of the following are non-cash charges EXCEPT

The primary purpose in preparing pro forma financial statements is

Cash planning involves the preparation of the firm's cash budget. Without adequate cashregardless of the level of profitsany firm could fail.

In the next planning period, a firm plans to change its policy of all cash sales and initiate a credit policy requiring payment within 30 days. The statements that will be directly affected immediately are the

Under MACRS, an asset which originally cost $100,000, incurred installation costs of $10,000, and has an estimated salvage value of $25,000, is being depreciated using a 5-year normal recovery period. What is the depreciation expense in year 1?

The key aspects of the financial planning process are

In cash budgeting, the impact of depreciation is reflected in a reduction in tax payments.

A corporation raises $500,000 in long-term debt to acquire additional plant capacity. This is considered

The strict application of the percent-of-sales method of preparing the pro forma income statement assumes all costs are

________ forecast is based on a buildup, or consensus, of sales forecasts through the firm's own sales channels, adjusted for additional factors such as production capabilities.

Calculate the change in the key balance sheet accounts between 2009 and 2010 and classify each as a source (S), a use (U), or neither (N), and indicate which type of cash flow it is: an operating cash flow (O), and investment cash flow (I) or a financing cash flow (F). ABC Corp. Balance Sheet Changes and Classification of Key Accounts between 2009 and 2010

It would be correct to define Operating Cash Flow (OCF) as net operating profit after taxes plus depreciation.

Darling Paper Container, Inc. purchased several machines at a total cost of $300,000. The installation cost for this equipment was $25,000. The firm plans to depreciate the equipment using the MACRS 5-year normal recovery period. Prepare a depreciation schedule showing the depreciation expense for each year.

The financial manager may cope with uncertainty and make more intelligent short-term financial decisions by preparing several cash budgets, each based on differing assumptions.

Calculate net operating profit after taxes (NOPAT) if a firm has sales of $1,000,000, operating profit (EBIT) of $100,000, interest expense of $50,000, and a tax rate of 30%.

In April, a firm had an ending cash balance of $35,000. In May, the firm had total cash receipts of $40,000 and total cash disbursements of $50,000. The minimum cash balance required by the firm is $25,000. At the end of May, the firm had

The sales forecast, cash budget, and pro forma financial statements are the key outputs of the short-run (operating) financial planning.