BUSMOD Week 4+5
Financial Planning & Forecasting Quiz
Test your knowledge and expertise in financial planning and forecasting with our engaging quiz. Designed for students, teachers, and professionals alike, this quiz covers essential topics such as sustainable growth rates, venture financing, and cash flow management.
Highlights:
- 49 thought-provoking questions
- Multiple choice format
- Ideal for those interested in business and finance
Long-term financial planning begins with a forecast of annual working capital needs.
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F
Forecasting for firms with operating histories is generally much easier than forecasting for early-stage ventures.
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F
A customer-driven or “bottom-up” approach to forecasting sales is used primarily to forecast industry sales growth rates.
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F
Sales forecasting accuracy is usually highest during a venture’s startup stage in its life cycle.
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F
Sales forecasting accuracy is usually lowest during a venture’s development stage in its life cycle.
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F
The rate at which a firm can grow sales based on the retention of business profits is known as sustainable sales growth rate.
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A firm’s maximum sustainable sales growth rate occurs at a retention ratio of 100%.
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F
Additional funds needed” (AFN) is the gap remaining between the financial capital needed and that funded by spontaneously generated funds and retained earnings.
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Increases in accounts receivable and accounts payable that accompany sales increases are called “spontaneously generated funds”.
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F
The percent of sales forecasting method must project all cost and balance sheet items at the same growth rate as sales.
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F
The “constant-ratio forecasting method” is a variant of the “percent-of- sales forecasting method.”
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F
Preparing a projected statement of cash flows serves as check on the projected income statement and projected balance sheet.
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A firm projects net income to be $500,000, intends to pay out $125,000 in dividends, and had $2 million of equity at the beginning of the year. The firm’s sustainable growth rate is:
5%
18.75%
6.25%
4.69%
None of the above
A sales growth rate based on the retention of profits is referred to as the:
Real sales growth rate
Sustainable sales growth rate
Spontaneous sales growth rate
Nominal sales growth rate
Weighted average sales growth rate
Use the following information to estimate a venture’s sustainable growth rate: Net income = $200,000; Total assets = $1,000,000; equity multiple based on beginning common equity = 2.0 times; and Retention rate = 25%.
50%
20%
25%
10%
5%
A venture’s common equity was $50,000 at the end of last year. If the venture’s common equity at the end of this year was $60,000, what was its sustainable sales growth rate?
5%
10%
15%
20%
25%
Determine a firm’s “financial policy” multiplier based on the following information: sustainable growth rate = 20%; net profit margin = 10%; and asset turnover = 2 times.
1
1.25
1.5
1.75
2
The financial funds still needed to finance asset growth after using spontaneously generated funds and any increase in retained earnings is called:
Spontaneously generated funds
Additional funds needed
Addition in retained earnings
Financial capital needed
Which of the following is a forecasting method used to project financial statements?
Percent-of-sales method
Percent-of-expenses method
GNP-ratio method
A and b
A, b and c
The type of financing that occurs during the survival stage of a venture’s life cycle is typically referred to as the:
Seed financing
Startup financing
First round financing
Second round financing
Mezzanine financing
Business angels typically initiate their investments during the:
Early stages of a venture’s lifecycle
Middle stages of a venture’s lifecycle
Maturity stage of a venture’s lifecycle
All of the above
Financial bootstrapping maximizes the need for financial capital.
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Which one of the following would not be considered a type of venture financing?
Seasoned financing
Liquidity-stage financing
Mezzanine financing
Startup financing
Seed financing
Business angels are wealthy individuals acting as informal or private investors, who provide venture financing for small businesses.
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Mezzanine financing is temporary financing needed to keep the venture afloat until the next offering.
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F
One principal of entrepreneurial finance is “risk and expected reward go hand in hand.
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Early-stage ventures include firms in their development, startup, or survival live cycle stages.
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F
Business angels are wealthy individuals who invest in early-stage ventures in exchange for the excitement of launching the business, as well as a share of the firm’s financial gains.
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Which of the following are not sources of seed and start-up financing?
Family and friends
Stock and bond markets
The entrepreneur’s physical and financial assets
Business angels
Venture capitalists
Wealthy individuals who invest in early stage ventures in exchange for the excitement of launching a business and a share in any financial rewards are known as:
Business angels
Stakeholders
Corporate raiders
White knights
Creditors
Financial markets where customized contracts or securities are negotiated, created, and held with restrictions on how they can be transferred are called:
Public financial markets
Private financial markets
Domestic financial markets
International financial markets
All of the above
Sarbanes-Oxley’s purpose is to improve financial reporting.
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There are two internal control objectives and they are to ensure accurate financial reports, and ensure compliance with applicable laws.
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Sarbanes-Oxley requires companies to maintain strong and effective internal controls and thus prevent fraud and misleading financial statements.
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The Sarbanes-Oxley Act requires that financial statements of all public companies report on management's conclusions about the effectiveness of the company's internal control procedures.
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The control environment in an internal control structure is the attitude and awareness of internal control by all employees.
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Separating the responsibilities for purchasing, receiving, and paying for equipment is an example of the control procedure: separating operations, custody of assets, and accounting.
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F
Internal control is enhanced by separating the control of a transaction from the record-keeping function
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F
A backlog in recording transactions is an example of a warning sign from the accounting system.
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F
Which one of the following below is not an element of internal control?
Behaviour analysis
Information and communication
Monitoring
Risk assessment
Which one of the following below is not a factor that influences a business's control environment?
Management's philosophy and operating style
Organisational structure
Proofs and security measures
Personnel policies
When a firm uses internal auditors, it is adhering to which one of the following internal control elements?
Risk assessment
Monitoring
Proofs and security measures
Separating responsibilities for related operations
The objectives of internal control are to
Control the internal organisation of the accounting department personnel and equipment
Provide reasonable assurance that operations are managed to achieve goals, financial reports are accurate, and laws and regulations are complied with
Prevent fraud, and promote the social interest of the company
Provide control over "internal-use only" reports and employee internal conduct
Which one of the following below reflects a weak internal control system?
All employees are well supervised
A single employee is responsible for comparing a receiving report to an invoice
All employees must take their vacations
A single employee is responsible for collecting and recording of cash
Internal control does not consist of policies and procedures that
Protect assets from misuse
Aid management in directing operations toward achieving business goals
Guarantee the company will not go bankrupt
Ensure that business information is accurate
A firm's internal control environment is not influenced by
Management's operating style
Organisational structure
Personnel policies
Monitoring policies
An element of internal control is
Risk assessment
Journals
Subsidiary ledgers
Controlling accounts
A necessary element of internal control is
Systems analysis
Information and communication
Systems design
Database
In management's internal control report that is now required of all public companies, which of the following does not have a direct effect on a company's internal control system?
Internal auditors
Independent accountants
Board of Trustees
Board of Director's audit committee
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