BUSI 320 Read & Interact Chapter 4 Assignment solutions complete answers

BUSI 320 Read & Interact Chapter 4 Assignment solutions complete answers 

 

A firm wishes to maintain a cash balance of $8,000 at all times. The cash budgets reveals that the firm will go below this amount in the month of May. To maintain the desired cash balance, the firm must       .

 

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

 

A company has forecasted sales of $50,000 in January, $40,000 in February, and $60,000 in March. All sales are on credit with 50% collected in the month of the sale, 30% collected in the month following the sale, and the remaining amount collected in the second month after the sale. After collections are made in the month of March, what will the accounts receivable balance be? 

 

A firm determines that sales will rise from $500,000 to $750,000 next year. The relationship of variable assets to sales is 50% and the relationship of variable liabilities to sales is 20%. The firm has a 10% profit margin and a dividend payout ratio of 30%. What is the level of new funds required?

 

Which of the following is a projection of future assets, liabilities, and stockholders' equity levels?

 

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?

 

A firm anticipates cash receipts for February of $20,000 and for March of $30,000. Cash payments are expected to be $5,000 in February and $7,000 in March. The cash balance at the beginning of February was $6,000, which is the level the firm wishes to maintain. At the beginning of February, the firm has a $21,000 loan balance on a line of credit with a local bank. Based on cash budget, how much can the firm repay in February and March?

 

If a company is operating at _______, it will need to buy new plant and equipment to produce more goods to sell.

 

A firm operating at full capacity will require a _____ level of new funds than a firm operating at less than full capacity to support its sales growth.

 

A firm anticipates a 30% growth in sales this coming year. Last year the firm had the following figures expressed as a percentage of sales: cash at 10%, accounts receivable at 25%, and inventory at 20%. Using the percentage-of-sales forecasting method, what percentage growth in current liabilities is needed to sustain the growth in sales?

 

What is the inventory accounting method for inventory that first allocates the cost of current sales to beginning inventory and then to goods manufactured during the period?

 

The percent-of-sales method for financial forecasting

 

An alternative to the systems approach for determining a firm's financial needs is the _________ method.

 

The primary purpose of the _____ budget is to allow the firm to anticipate the need for outside funding at the end of each month.

 

The pro forma balance sheet is developed by integrating the information from the _____

 

According to the text, if there is one talent essential to the financial manager it is the ability to     .

 

This formula is used to determine the firm’s      requirements:

 

A firm has total receipts of $16,000, $20,000, & $18,000 and total payments of $12,000, $15,000, & $12,500, in January, February, & March, respectively. The firm's net cast flow for January is _____.

 

In developing data for accounts payable for the pro forma balance sheet, the financial manager is most likely to turn to the

 

The firm has projected sales of $30,000 in June, $25,000 in July, and $20,000 in August. 20% of sales are collected in the month of the sales and 80% are collected in the month following the sale. What are cash receipts in August?

 

A company anticipates monthly sales of $400,000 (i.e., per month in January, February, March, and April). Material costs of each month represents 55% of sales of that month and due to level production, material purchases will be equal for each month. Labor costs are expected to be $15,000 in January, $18,000 in February, $14,000 in March, and $19,000 in April. Fixed overhead is $10,000 per month. General and administrative expenses are $2,500 per month, an interest expense of $2,500 is paid in March, new equipment is purchased for $10,000 in February, and a dividend of $3,000 is paid in March. The company's total cash payments in March are _____?

 

A firm's operating is $50,000, interest expense is $4,000, the tax rate is 35%, and common stock dividends are $2,500. Calculate the firm's earnings after taxes:

 

A firm using FIFO inventory accounting method has a beginning inventory of 300 units at a cost of $15 each. During the period the firm produced 700 units at a cost of $17 each. If the firm sold 800 units during the period, the cost of goods sold is _____?

 

A company should be able to estimate which of the following on the basis of its projected financial statements?

 

The inventory methods used most commonly for determining cost of goods sold include:

 

The __________ provides a projection of how much profit the firm anticipates making over the ensuing time period.

 

The primary considerations for cash payments are monthly costs associated with

 

Using a systems approach, the first pro forma statement to be constructed is the

 

Following the steps needed to develop the pro forma income statement. Place each step in its proper order.

 

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 _____.

 

It is crucial that a firm ensure that adequate cash is available to _____.

 

A firm that does not wish to borrow to meet anticipated sales growth may instead decide to

 

3.
A company has forecasted sales of $50,000 in January, $40,000 in February, and $60,000 in March. All sales are on credit with 50% collected in the month of the sale, 30% collected in the month following the sale, and the remaining amount collected in the second month after the sale. What will the accounts receivable balance be after collections are made in the month of March.
 
 
6.
A company that has the ability to increase sales with its current plant and equipment is said to be
 
 
7.
The difference between total cash receipts and total cash payments is referred to as
 
 
8.
The difference between total cash receipts and total cash payments is referred to as
 
 
9.
Financial forecasting is essential to the strategic _____ of the firm.
 
 
19.
A firm using the FIFO inventory accounting method has beginning inventory of 300 units at a cost of $15 each. During the period the firm produced 700 units at a cost of $17 each. If the firm sold 800 units during the period, what is the value of the ending inventory.
 
 
20.
The importance of the pro forma income statement is to provide a projection of how much _____ is anticipated over the ensuing time period.
 
 
21.
The information used to prepare the pro forma balance sheet comes from the following:
 
 
 
 
 
 
 
 
 
 
 
 

24.
The _____ method assumes that accounts on the balance sheet will maintain a given percentage relationship to sales
 
 
25.
The most comprehensive means of financial forecasting is to
 
 
28.
The production plan is dependent upon the _____ projection
 
 
31.
What is the inventory accounting method that first allocates the cost of current sales to goods manufactured during the period until current production is depleted, and then to beginning inventory?
 
 
32.
Which of the following is more likely to need to raise additional long-term capital to support its anticipated sales growth?
 
 
33.
Which of the following two methods provides a month-to-month breakdown of the data
1) systems approach
2) Percent of sales
 
 
 
 
 
 
 
 
 

 

3.
The area on the graph above the break-even point represents:
 
 
4.
Assuming that the break-even point has been surpassed, a firm that utilizes a high degree of operating leverage will produce ______ profits than a firm that utilizes a lower degree of operating leverage.
 
 
5.
Assuming the break-even point has been surpassed, a firm that utilizes a low degree of operating leverage will produce ______ profit compared to a firm that utilizes a higher degree of operating leverage
 
 
6.
At high levels of operation, the potential profit for a firm that is highly leveraged is ______________ compared to those of a firm that is not highly leveraged.
 
 
7.
At high levels of operation, the profit potential for a firm that is not highly leveraged is _______ compared to that of a highly leveraged firm.
 
 
8.
Besides depreciation, what other noncash items can be adjusted when using cash break-even analysis?
 
 
9.
Break-even analysis is used to answer which of the following questions?
 
 
10.
The break-even point is:
 
 
11.
Cash break-even analysis is helpful in analyzing the __________ outlook of the firm, particularly when the firm may be in trouble.
 
 
12.
A company employing heavy financial leverage has a cost to borrow of 8% and return on assets of 10%. As EBIT increases the firm will greatly expand its _____________
 
 
14.
A company that has the ability to increase sales with its current plant and equipment is said to be:
 
 
15.
Contribution margin is defined as:
 
 
16.
The curve on the break-even chart that starts at zero on the vertical axis and increases by the amount of the product's price represents the firm's:
 
 
17.
Debt and equity are methods to:
 
 
18.
Degree of financial leverage is defined as
 
 
19.
The degree of operating leverage can be defined as the:
 
 
20.
Depreciation is an accounting flow rather than a:
 
 
21.
The difference between monthly cash receipts and payments is referred to as ____________
 
 
22.
The difference between total cash receipts and total cash payments is referred to as?
 
 
23.
During an economic downturn, when a firm's sales volume is low, a firm that has high variable costs may:
 
 
24.
During an economic upturn, when a firm's sales volume is high, a firm that has high fixed costs may ______?
 
 
25.
The extent to which debt is utilized in the firm is:
 
 
26.
Financial forecasting is essential to the strategic __________ of the firm.
 
 
27.
Financial leverage is defined as
 
 
28.
A firm must first determine the amount of which types of costs to be used in the production process.
 
 
29.
A firm operating at full capacity will require a ______ level of funds than a firm operating at less than full capacity.
 
 
30.
Firms that expand the use of debt in their capital structure run the risk of:
 
 
31.
Firms that rely on debt financing will:
 
 
32.
Firms that rely on equity financing will:
 
 
33.
Firms that take a conservative approach to the use of operating leverage may increase variable costs in lieu of adding __________ costs.
 
 
34.
Fixed costs include:
 
 
35.
The higher a firm's degree of operating leverage, the greater the increase in income as:
 
 
36.
The horizontal axis of the break-even chart represents the:
 
 
38.
In developing data for accounts receivable for the pro forma balance sheet, the financial manager is most likely to turn to the:
 
 
39.
____________ leverage reflects the extent to which fixed assets and associated fixed costs are utilized in the business.
 
 
40.
The line on the break-even chart that starts with fixed costs at the vertical axis and increases by the amount of the variable costs per additional units produced represents the firm's ________
 
 
41.
Maximum leverage can be achieved through the use of __________ leverage.
 
 
 
 
 
 
 
 
 
 
 

42.
The primary considerations for cash payments are monthly costs associated with:
 
 
43.
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?
 
 
44.
The production plan is dependent upon the ________ projection.
 
 
45.
The production process requires that management determine the amount of _________ to be used.
 
 
47.
Sales growth can be financed through which of the following?
 
 
48.
Semi-variable costs
 
 
49.
Semi-variable costs ___________ as the number of units produced increases.
 
 
50.
Semi-variable costs include:
 
 
51.
Steps to develop a pro forma income statement
 
 
52.
Substantial use of debt will place a large burden on the firm at (high or low) levels of profitability.
 
 
53.
To evaluate the implications of using heavy fixed assets, a firm can employ the technique of:
 
 
54.
The use of debt is recommended for firms in industries that:
 
 
55.
Using cash break-even analysis, what is deducted from fixed costs to arrive at the break-even point?
 
 
56.
Variable costs include:
 
 
57.
The vertical axis of the break-even chart represents the
 
 
58.
When management expects an economic downturn it may be in the firm's best interest to undertake a(n) ________ plan.
 
 
59.
When preparing a pro forma income statement, the main consideration is the ___________ for the time period.
 
 
60.
Which factor(s) influence management's decision to follow a more aggressive approach to the firm's leverage or a more conservative approach?
 
 
61.
Which method provides a month-to-month breakdown of the data?
 
 
 
 
 
 
 
 
 

 

2.
A company anticipates monthly sales of $300,000 for the months of April, May, June, and July. Materials represent 50% of sales, and because of level production, material purchases will be equal for each month. Materials are paid for one month after the month purchased. Labor costs are $16,000 in April, $19,000 in May, $16,000 in June, and $21,000 in July. Fixed overhead is $12,000 per month. General and administrative expenses are $2,000 per month, interest expense of $2,500 is paid in May, and new equipment of $10,000 is also purchased in May. What are the company's total cash payments in May?
 
 
3.
A company should be able to estimate which of the following on the basis of its projected financial statements?
 
 
5.
The difference between total cash receipts and total cash payments is referred to as?
 
 
6.
Financial forecasting is essential to the strategic ____ of the firm
 
 
9.
A firm has total receipts of $16,000, $20,000, and $18,000 and total payments of $12,000, $15,000, & $12,500, in January, February, and March respectively. The firms net cash flow for January is_____.
 
 
12.
A firm that does not wish to borrow to meet anticipated sales growth may instead decide to
 
 
13.
A firm using the FIFO inventory accounting method has beginning inventory of 300 units at a cost of $15 each. During the period the firm produced 700 units at a cost of $17 each. If the firm sold 800 units during the period, the cost of goods sold is ______
 
 
14.
A firm using the FIFO inventory accounting method has beginning inventory of 300 units at a cost of $15 each. During the period the firm produced 700 units at a cost of $17 each. If the firm sold 800 units during the period, the cost of goods sold is ______
 
 
16.
If there is one skill that is essential for a financial manager to develop, it is the ability to plan ahead and to make necessary adjustments before actual events occur.
 
 
17.
The information used to prepare the pro forma balance sheet comes from which of the following:
 
 
18.
In preparation of the pro forma income statement, which of the following items are deducted from gross profits to arrive at earnings after taxes?
 
 
19.
The inventory methods used most commonly for determining cost of goods sold include
 
 
 
 
 
 
 
 
 
 
 
 
 

21.
The most comprehensive means of financial forecasting is to develop a series of pro forma, or projected, financial statements.
 
 
24.
The primary considerations for cash payments are monthly costs associated with
 
 
27.
The production plan is dependent upon the ____ projection
 
 
31.
The ____ provides a projection of how much profit the firm anticipates making over the ensuing time period.
 
 
33.
Using a system approach, the first pro forma statement to be constructed is the
 
 
35.
Which of the following is more likely to need to raise additional long-term capital to support its anticipated sales growth?
 
 
 
 
 
 
 
 
 

 

The largest expense associated with a merchandising firm is its

          

The primary considerations for cash payments are monthly costs associated with

          

 

A company has sales of $1000000, COGS at 60%, general and administrative expenses of $250000, interest expense of $25000, and a tax rate of 40%. The firm’s earnings after taxes is_____________.

          

What are the steps needed to develop the pro forma income statement

 

The production plan is dependent upon the _______ projection

          

The importance of the pro forma income statement is to provide a projection of how much _______ is anticipated over the ensuring time period

          

A firm that does not wish to borrow to meet anticipated sales growth may instead decide to

          

Cash payments may be necessary for all of the following except

          

A company should be able to estimate which of the following on the basis of its projected financial statements

 

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.

          

 

A firms OP is $50,000, interest Exp is $4000, the tax rate is 35% and common stock dividends are $2500. What are the firm’s earnings after taxes_____

          

Which approach to determining a firm’s financial needs is easier to use but less exacting?

          

Sales growth can be financed through which of the following

          

 

A firm using the FIFO inventory accounting method has beginning inventory of 300 units at a cost of $15 each, during the period the firm produced 700 units…the cost of goods sold is_____

          

The most comprehensive means of financial forecasting is to

          

It is crucial that a firm ensure that adequate cash is available to

          

A firm has total receipts 16000,20000 and 18000 and total payments 12000, 15000, 12500. What is the firms net cash flow _____

          

a company anticipates monthly sales of 400000…the total cash payment in march is____

          

The difference between total cash receipts and total cash payments is referred to as

          

In prep of the pro forma income statement, which of the following items are deducted from gross profits to arrive at earnings after taxes

          

 

Info used to prepare the pro forma balance sheet comes from which of the following

          

 

The one talent essential to the financial manager is the ability

          

The firm has projected sales of 30000… 20% of sales are collected…what are the cash receipts in August?

          

A company that has the ability to increase with its current plant and equipment is said to be

          

The last step in the process of developing pro forma financial statements is the

          

Which of the following is a projection of future assets, liabilities and stockholders equity

          

Some companies prefer to use the _____ inventory accounting method because it provides a higher cost of goods sold value and a lower inventory value during periods of rising prices

 

The____ mthod assumes that accounts on the balance sheet will maintain a given percentage relationship to sales

          

 

A company forecasted sales of 50000 in January, 40000 in feb and 60000 in march…

          

Accounting method that first allocates the current sales to good manufactured

          

Maintain a cash balance of 8000, the bash budget will dip below what do they do?

          

A firm determines that sales will rise from 500000 to 750000….

          

Financial forecasting is essential to the strategic____ of the firm

          

During periods of inflation, FIFO inventory accounting