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Exam 4: Cash Flow and Financial Planning

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Question 51

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The depreciable value of an asset,under MACRS,is ________.

A) the full cost excluding installation costs
B) the full cost minus salvage value
C) the full cost including installation costs
D) the full cost including installation costs adjusted for the salvage value

E) All of the above
F) A) and B)

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Question 52

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The weakness of the judgmental approach to preparing a pro forma balance sheet is ________.

A) the assumption that the values of certain accounts can be forced to take on desired levels
B) the assumption that the firm faces linear total revenue and total operating cost functions
C) the assumption that the firm's past financial condition is an accurate predictor of its future
D) ease of calculation and preparation

E) C) and D)
F) A) and B)

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Question 53

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Strategic financial plans are planned long-term financial actions and the anticipated financial impact of those actions.

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%.

Table 4.4 Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2015, for Hennesaw Lumber, Inc. Hennesaw Lumber, Inc. estimates that its sales in 2000 will be $4,500,000. Interest expense is to remain unchanged at $105,000 and the firm plans to pay cash dividends of $150,000 during 2015. Hennesaw Lumber, Inc.'s income statement for the year ended December 31, 2014 is shown below. From your preparation of the pro forma income statement, answer the following multiple choice questions. -The pro forma operating expenses for 2015 are ________.(See Table 4.4)

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

In the statement of cash flows,the cash flows from financing activities result from debt and equity financing transactions; including incurrence and repayment of debt,cash inflow from the sale of stock,and cash outflows to repurchase stock or pay cash dividends.

Which of the following represents a cash flow from operating activities?

Key inputs to short-term financial planning are ________.

If a firm expects short-term cash surpluses,it can plan ________.

For the year ended December 31,2014,a corporation had cash flow from operating activities of $20,000,cash flow from investment activities of -$15,000,and cash flow from financing activities of -$10,000.The statement of cash flows would show a ________.

Which of the following is a cash inflow?

Given a financial manager's preference for faster receipt of cash flows,a longer depreciable life is preferred to a shorter one.

NICO Corporation had net current assets of $2,000,000 at the end of 2015 and $1,800,000 at the end of 2014.In addition,NICO had net spontaneous current liabilities of $1,000,000 in 2015 and $1,500,000 in 2014.Using this information,NICO's net current asset investment for 2014 was ________.

Given a financial manager's preference for faster receipt of cash flows,________.

Table 4.3 The financial analyst for Sportif, Inc. has compiled sales and disbursement estimates for the coming months of January through May. Historically, 75 percent of sales are for cash with the remaining 25 percent collected in the following month. The ending cash balance in January is $3,000. -The firm has a negative net cash flow in the month(s) of ________.(See Table 4.3)

Table 4.1 True Sandpaper Co. Balance Sheets For the Years Ended 2014 and 2015 -The largest single source of funds for the firm in 2015 is ________.(See Table 4.1)

Calculate the change in the key balance sheet accounts between 2014 and 2015 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 2014 and 2015

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

Operating cash flow (OCF)is equal to a firm's net operating profits after taxes minus all non-cash charges.