Multiple Choice

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Chapter 3

Multiple Choice

This activity contains 20 questions.

The ______ summarises the firm's cash flow over a given period of time.

balance sheetstatement of cash flowsincome statementAll of the above.

Given the financial manager's preference for faster receipt of cash flows:

the manager is not concerned with depreciable lives, because depreciation is a non-cash expense.the manager is not concerned with depreciable lives, because once purchased, depreciation is considered a sunk cost.a longer depreciable life is preferred to a shorter one.a shorter depreciable life is preferred to a longer one.

The statement of cash flows provides a summary of the firm's _____________.

investing cash flows.cash flows from operations.cash inflows from financing.All of the above.

Cash flows directly related to the production and sale of the firm's products and services are called:

operating cash flows.investing cash flows.financing cash flows.None of the above.

Cash flows associated with purchase and sale of both non-current assets and business interests are called:

financing cash flows.investing cash flows.operating cash flows.None of the above.

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

operating cash flows.investing cash flows.financing cash flows.None of the above.

The financial planning process begins with _ financial plans that in turn guide the formation of _ plans and budgets.

short-run; long-runlong-run; strategicshort-run; operatinglong-run; short-run

The key aspects of the financial planning process are:

cash planning and profit planning.cash planning and investment planning.investment planning and profit planning.cash planning and financing.

Pro forma statements are used for:

profit planning.credit analysis.cash budgeting.leverage analysis.

_____ consider proposed fixed-asset outlays, research and development activities, marketing and product development actions, and both the mix and major sources of financing.

Long-term financial plansPro-forma statementsShort-term financial plansCash budgeting

Once sales are forecasted, _____ must be generated to estimate a variety of operating costs.

a pro forma statementa cash budgeta production planan operating budget

In cash budgeting, the _ seasonal and uncertain a firm's cash flows, the _ the number of intervals.

less; greaterless; smallermore; greatermore; smaller

Cash disbursements may include all of the following EXCEPT:

depreciation expense.fixed asset outlays.tax payments.rent payments.

One way a firm can reduce the amount of cash it needs in any one month is to:

speed up payment of accounts payable.accrue taxes.slow down the payment of receivables.delay the payment for fixed asset outlays.

If a firm expects short-term cash surpluses it can plan:

short-term borrowing.leverage decisions.short-term lending.long-term investments.

The key inputs for preparing pro forma income statements using the simplified approaches are the:

sales forecast for the preceding year and financial statements for the coming year.sales forecast for the coming year and the cash budget for the preceding year.sales forecast for the coming year and financial statements for the preceding year.cash budget for the coming year and sales forecast for the preceding year.

The _____ method of developing a pro forma income statement forecasts sales and values for the cost of goods sold, operating expenses, and interest expenses that are expressed as a ratio of projected sales.

accrualcashjudgmentalper cent-of-sales

The primary purpose in preparing pro forma financial statements is:

to ensure the ability to pay dividends.for cash planning.for profit planning.for risk analysis.

Under the judgmental approach for developing a pro forma balance sheet, the 'plug' figure required to bring the statement into balance may be called the:

cash balance.retained earnings.external financing required.accounts receivable.

A weakness of the per cent-of-sales method to preparing a pro forma income statement is:

that it is a quick method to prepare 'rough estimates' for the values of certain accounts.the assumption that the firm's past financial condition is an accurate predictor of its future.ease of calculation and preparation.the assumption that the firm faces linear total revenue and total operating cost functions.

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Multiple Choice

The ______ summarises the firm's cash flow over a given period of time.

Given the financial manager's preference for faster receipt of cash flows:

The statement of cash flows provides a summary of the firm's _____________.

Cash flows directly related to the production and sale of the firm's products and services are called:

Cash flows associated with purchase and sale of both non-current assets and business interests are called:

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

The financial planning process begins with _____ financial plans that in turn guide the formation of _____ plans and budgets.

The key aspects of the financial planning process are:

Pro forma statements are used for:

_____ consider proposed fixed-asset outlays, research and development activities, marketing and product development actions, and both the mix and major sources of financing.

Once sales are forecasted, _____ must be generated to estimate a variety of operating costs.

In cash budgeting, the _____ seasonal and uncertain a firm's cash flows, the _____ the number of intervals.

Cash disbursements may include all of the following EXCEPT:

One way a firm can reduce the amount of cash it needs in any one month is to:

If a firm expects short-term cash surpluses it can plan:

The key inputs for preparing pro forma income statements using the simplified approaches are the:

The _____ method of developing a pro forma income statement forecasts sales and values for the cost of goods sold, operating expenses, and interest expenses that are expressed as a ratio of projected sales.

The primary purpose in preparing pro forma financial statements is:

Under the judgmental approach for developing a pro forma balance sheet, the 'plug' figure required to bring the statement into balance may be called the:

A weakness of the per cent-of-sales method to preparing a pro forma income statement is:

The financial planning process begins with _ financial plans that in turn guide the formation of _ plans and budgets.

In cash budgeting, the _ seasonal and uncertain a firm's cash flows, the _ the number of intervals.