1) In chapter 6, Projecting Financial Requirements and Managing Growth, the author focuses on three critical questions to examine the firm’s financial future. Which of the following questions is NOT addressed by the author in this chapter?
A) How much and what type of financing will be required to meet goals and expectations?
B) How do we compensate mangers to attract and keep good executives?
C) How profitable do we expect the firm to be in the coming years?
D) What is the RIGHT amount of sales growth (as opposed to too little or too much)?
2) Which of the following equations represents a simple and effective way to think about anticipated external funding?
A) External funds required = assets – liabilities – equity
B) External funds required = assets + liabilities – equity
C) External funds required = assets + liabilities + equity
D) External funds required = assets – liabilities + equity
3) Managers often begin with an estimate of ________ when beginning to develop pro forma financial statements.
A) net income
B) sales
C) assets
D) equity
4) When constructing pro forma income statements which of the following is the last item to be estimated?
A) sales
B) the change in retained earnings
C) depreciation expense
D) taxes
5) When constructing a pro forma income statement, which of the following is likely to be calculated first among the items listed?
A) dividends
B) taxes
C) cost of goods sold
D) interest expense
6) When constructing pro forma balance sheets, ________ becomes the “plug” figure to make the balance sheet balance.
A) new fixed assets required
B) addition to retained earnings
C) cash
D) external funding required
7) Which of the following is NOT a potential source of outside financing for a corporation?
A) new bank loans
B) new long-term debt
C) sale of new equity
D) additions to retained earnings
8) Dunweiler Inc., is developing a pro forma income statement for the coming year. The chief financial officer estimates that sales will be $150,000,000. If gross profits are historically 36% of sales, what is the expected cost of goods sold (in dollars)?
A) $36,000,000
B) $54,000,000
C) $64,000,000
D) $96,000,000
9) Dunweiler Inc., is developing a pro forma income statement for the coming year. The chief financial officer estimates that sales will be $150,000,000. If selling, general, and administrative expenses (SGA) are historically 18% of sales, what are the expected SGA expenses (in dollars)?
A) $18,000,000
B) $27,000,000
C) $30,000,000
D) $41,000,000
10) Cantanna Inc., is developing a pro forma income statement for the coming year. The chief financial officer estimates that fixed assets are $70,000,000 and that sales will be $300,000,000. If depreciation is historically 20% of fixed assets, what is the expected amount of depreciation for the upcoming year (in dollars)?
A) $14,000,000
B) $20,000,000
C) $60,000,000
D) This figure cannot be reasonably estimated.
