Chapter 4 Smartbook Questions

yields lower cost of goods sold values than LIFO

During periods of inflation, FIFO inventory accounting Multiple choice question. yields lower ending inventory values than LIFO yields lower cost of goods sold values than LIFO yields higher cost of goods sold values than LIFO yields higher unit sales than LIFO

growth

Financial forecasting is essential to the strategic Blank______ of the firm. Multiple choice question. placement growth mission vision

1. Establish a sales projection 2. Determine a production schedule 3. Compute other expenses 4. Determine profit

Following the steps needed to develop the pro forma income statement. Place each step in its proper order. Instructions Determine a production schedule Compute other expenses Establish a sales projection Determine profit

precautionary

Holding cash for emergency purposes is a Blank______ motive. Multiple choice question. precautionary compensating balance transactional

full capacity

If a company is operating at Blank______, it will need to buy new plant and equipment to produce more goods to sell. Multiple choice question. full capacity less than full capacity

cash budget.

In developing data for accounts payable for the pro forma balance sheet, the financial manager is most likely to turn to the Multiple choice question. cash budget. production schedule. statement of retained earnings. pro forma income statement.

tax expense General and administrative expenses interest expense

In preparation of the pro forma income statement, which of the following items are deducted from gross profits to arrive at earnings after taxes? Multiple select question. Cost of goods sold tax expense General and administrative expenses interest expense

tax expense interest expense General and administrative expenses

In preparation of the pro forma income statement, which of the following items are deducted from gross profits to arrive at earnings after taxes? Multiple select question. tax expense Cost of goods sold interest expense General and administrative expenses

plan ahead and to make necessary adjustments before actual events occur.

According to the text, if there is one talent essential to the financial manager it is the ability to Blank______. Multiple choice question. plan ahead and to make necessary adjustments before actual events occur. be willing to take educated risks. learn from mistakes from the past and move forward to the future. make adjustments after events occur.

percent-of-sales

An alternative to the systems approach for determining a firm's financial needs is the Blank______ method. Multiple choice question. judgmental sales projection percent-of-sales articulated

Sale of common stock. Use of notes payable. Issuance of long-term debt.

Sales growth can be financed through which of the following? Multiple select question. Purchase of common stock. Sale of common stock. Use of notes payable. Issuance of long-term debt.

issue additional common stock. issue preferred stock.

Select all that apply A firm that does not wish to borrow to meet anticipated sales growth may instead decide to Multiple select question. issue additional common stock. sell off fixed assets. issue preferred stock.

issue preferred stock. issue additional common stock.

Select all that apply A firm that does not wish to borrow to meet anticipated sales growth may instead decide to Multiple select question. issue preferred stock. issue additional common stock. sell off fixed assets.

Issuance of long-term debt. Use of notes payable. Sale of common stock.

Select all that apply Sales growth can be financed through which of the following? Multiple select question. Issuance of long-term debt. Use of notes payable. Sale of common stock. Purchase of common stock.

Use of notes payable. Sale of common stock. Issuance of long-term debt.

Select all that apply Sales growth can be financed through which of the following? Multiple select question. Purchase of common stock. Use of notes payable. Sale of common stock. Issuance of long-term debt.

pro forma income statement prior year's balance sheet cash budget

Select all that apply The information used to prepare the pro forma balance sheet comes from which of the following: Multiple select question. pro forma income statement prior year's balance sheet cash budget prior year's income statement

inventory manufactured during the period. general and administrative expenses. interest payments and taxes.

Select all that apply The primary considerations for cash payments are monthly costs associated with Multiple select question. inventory manufactured during the period. cash inflows from operating activities general and administrative expenses. interest payments and taxes.

last-in, first out (LIFO)

Some companies prefer to use the Blank______ inventory accounting method because it provides a higher cost of goods sold value and a lower inventory value during periods of rising prices. Multiple choice question. first-in, first-out (FIFO) specific identification last-in, first out (LIFO) weighted average

percent-of-sales

The Blank______ method assumes that accounts on the balance sheet will maintain a given percentage relationship to sales Multiple choice question. cost of goods sold sales projection percent-of-sales judgmental

pro forma income statement

The Blank______ provides a projection of how much profit the firm anticipates making over the ensuing time period. Multiple choice question. sales projection cash budget pro forma income statement prof forma balance sheet

sales projection.

The crucial starting point in constructing pro forma financial statements is the Blank______. Multiple choice question. sales projection. cash budget. income statement. production plan.

475,000 units Reason: 500K + 25K - 50 K = 475K units

The firm projects sales at 500,000 units and requires an ending inventory of 25,000 units. If the firm's beginning inventory is 50,000 units, what is the firm's production requirement for the period? Multiple choice question. 475,000 units 450,000 units 575,000 units 525,000 units

establish a sales projection

The first step in developing the pro forma income statement is to Multiple choice question. determine a production schedule establish a sales projection compute other expenses determine net earnings

profit

The importance of the pro forma income statement is to provide a projection of how much Blank______ is anticipated over the ensuing time period. Multiple choice question. debt profit cash accounts receivable

cost of goods sold.

The largest expense associated with a merchandising firm is its Multiple choice question. depreciation expense. interest expense. operating expenses. cost of goods sold.

cost of goods sold.

The largest expense associated with a merchandising firm is its Multiple choice question. interest expense. cost of goods sold. depreciation expense. operating expenses.

pro forma balance sheet

The last step in the process of developing pro forma financial statements is the Multiple choice question. pro forma income statement production plan pro forma balance sheet cash budget

develop a series of projected, or pro forma, financial statements.

The most comprehensive means of financial forecasting is to Multiple choice question. develop a series of projected, or pro forma, financial statements. analyze prior year balance sheet as the basis for the projected income statement. develop sales projections two years in advance. develop a detailed marketing strategy.

assumes balance sheet accounts maintain a constant relationship to sales.

The percent-of-sales method for financial forecasting Multiple choice question. provides a month-to-month breakdown of the data. is the most difficult method to use because it requires tracing cash & accounting flows. is more exacting than the systems approach. assumes balance sheet accounts maintain a constant relationship to sales.

cash

The primary purpose of the Blank______ budget is to allow the firm to anticipate the need for outside funding at the end of each month. Multiple choice question. liabilities credit fixed asset cash

pro forma income statement and cash budget.

The pro forma balance sheet is developed by integrating the information from the Blank______ Multiple choice question. statement of changes in equity. pro forma cash flow statement. statement of retained earnings. pro forma income statement and cash budget.

pro forma income statement and cash budget.

The pro forma balance sheet is developed by integrating the information from the Blank______ Multiple choice question. statement of retained earnings. pro forma income statement and cash budget. pro forma cash flow statement. statement of changes in equity.

cash inflows cash outflows

The process of dividing the pro forma income statement into smaller time frames is done to anticipate the seasonal and monthly patterns of which of the following? Multiple select question. cash inflows projected sales production cash outflows

sales

The production plan is dependent upon the________projection.

production

This formula is used to determine the firm's Blank______ requirements: Blank______ = Projected sales + Desired ending inventory - Beginning inventory Multiple choice question. production marketing accounting financial

beginning cash balance to the budgeted cash receipts and deduct budgeted cash payments

To calculate the cash balance before financing on the cash budget, add the Blank______. Multiple choice question. beginning cash balance to the budgeted cash payments and subtract the budgeted cash receipts cash borrowed or repaid to the ending cash balance beginning cash balance to the budgeted cash receipts and deduct budgeted cash payments budgeted cash receipts to the budgeted cash payments and subtract the beginning cash balance

False

True or false: The generation of sales and profits ensures adequate cash on hand to meet financial obligations.

cost of goods sold

When preparing a pro forma income statement, the main consideration is the Blank______ for the time period. Multiple choice question. depreciation expenses cost of goods sold operating expenses contribution margin

Percent-of-sales method

Which approach to determining a firm's financial needs is easier to use but less exacting? Multiple choice question. Percent-of-sales method Systems approach

Pro forma balance sheet

Which of the following is a projection of future assets, liabilities, and stockholders' equity levels? Multiple choice question. Cash receipts budget Pro forma income statement Sales forecast Pro forma balance sheet

A firm operating at full capacity

Which of the following is more likely to need to raise additional long-term capital to support its anticipated sales growth? Multiple choice question. A firm operating at full capacity A firm operating at less than full capacity Cannot be determined

A firm operating at full capacity

Which of the following is more likely to need to raise additional long-term capital to support its anticipated sales growth? Multiple choice question. A firm operating at less than full capacity A firm operating at full capacity Cannot be determined

Systems approach

Which of the following two methods provides a month-to-month breakdown of the data? Multiple choice question. Systems approach Percent-of-sales

$75,000

A company has sales of $1,000,000, cost of goods sold at 60% of sales, general and administrative expenses of $250,000, interest expenses of $25,000, and a tax rate of 40%. The firm's earnings after taxes is

inventory payables accounts receivable

A company should be able to estimate which of the following on the basis of its projected financial statements? Multiple select question. inventory payables market value of its common stock accounts receivable

operating at less than full capacity

A company that has the ability to increase sales with its current plant and equipment is said to be Blank______. Multiple choice question. operating at full capacity. operating at less than full capacity

higher

A firm operating at full capacity will require a Blank______ level of new funds than a firm operating at less than full capacity. Multiple choice question. higher undetermined lower equal

borrow additional funds.

A firm wishes to maintain a cash balance of $8,000 at all times. The cash budgets reveals that that the firm will go below this amount in the month of May. To maintain the desired cash balance, the firm must Blank______. Multiple choice question. borrow additional funds. sell additional preferred stock. float additional corporate bonds. sell additional common stock.

depreciation expenses.

Cash payments may be necessary for all of the following except Multiple choice question. depreciation expenses. general expenses. issuing a cash dividend. manufacturing overhead.