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16 Cards in this Set

  • Front
  • Back
The primary purpose of the cash budget is to plan accounts payable payments.
True
False
False
The primary purpose of the cash budget is to allow the firm to anticipate the need for outside funding or excess funds to be invested.

True
False
True
An increase in accounts receivable and a decrease in accounts payable will reduce the amount of new external funds required.

True
False
False
Depending upon the state of the economy, Ables Manufacturing Corp. expects to sell the following number of prefabricated buildings. The probability of each state is indicated. What is the expected value of the total sales projection?

Outcome Probability Units Price
A - Bad 0.15 75 $20
B - Normal 0.60 150 $35
C - Great 0.25 200 $45

a. $5,625
b. $4,540
c. $12,800
d. None of these
A
XYZ Co. has forecasted June sales of 400 units and July sales of 700 units. The company maintains ending inventory equal to 125% of next month's sales. June beginning inventory reflects this policy. What is June's required production?

a. 775 units
b. 750 units
c. -0- units
d. 425 units
A
A firm has beginning inventory of 450 units at a cost of $10 each. Production during the period was 500 units at $12 each. If sales were 700 units, what is the cost of goods sold (assume FIFO)?

a. $7,900
b. $7,500
c. $8,000
d. $8,100
B
MG Lighting had sales of 500 units at $100 per unit last year. The marketing manager projects a 15 percent decrease in unit volume this year because a 10 percent price increase is needed to pass rising costs through to customers. Returned merchandise will represent 3.2 percent of total sales. What is your net dollar sales projection for this year?

a. $26,976
b. $69,344
c. $72,800
d. None of these
D
In financial statements, the number of units shown in cost of goods sold as compared to the number of the units actually produced

a. is higher.
b. is lower.
c. is the same.
d. can be either higher or lower.
D
In general, the larger the portion of a firm's sales that are on credit, the

a. higher will be the firm's need to borrow.
b. more rapidly credit sales will be paid off.
c. more the firm can buy raw materials on credit.
d. lower will be the firm's need to borrow.
A
Wiggles Right forecasted sales of $5,000 in October, $4,000 in November and $4,000 in December. All sales are on credit. 40% is collected the month of sale and the remainder the following month. How much is collected from accounts receivable in November?

a. $5,400
b. $4,600
c. $4,800
d. $6,000
B
GS Cookie Co. forecasts cash receipts for January and February of $18,000 and $20,000, respectively. Cash Payments of $6,000 and $8,000 are expected in these two months. GS Cookie's cash balance at the beginning of January was $5,000, a level that it attempts to maintain. At the beginning of the year, GS Cookie has a $15,000 balance outstanding on its line of credit at the local bank. Based on its cash budget, how much of the line of credit can GS Cookie repay in January and February?

a. $15,000
b. $9,000
c. $4,000
d. None, GS Cookie must increase its borrowings.
A
In the construction of the cash payments schedule, the major cash payment is generally

a. costs associated with inventory manufactured.
b. the general and administrative expense.
c. payments for new plant and equipment.
d. interest and dividends.
A
The difference between total receipts and total payments is referred to as

a. cash balance.
b. beginning cash flow.
c. cumulative cash flow.
d. net cash flow.
D
Net cash flow is equal to:

a. income after taxes minus dividends.
b. income after taxes minus depreciation.
c. cash receipts minus cash payments minus depreciation.
d. cash receipts minus cash payments.
D
In the percent-of-sales method, an increase in dividends

a. will increase required new funds.
b. will decrease required new funds.
c. has no effect on required new funds.
d. more information is needed.
A
When using the percent-of-sales method in forecasting funds needed, which of the following is not true?

a. Required new funds increase as the dividend payout decreases.
b. As the ratio of assets to sales decrease, required new funds also decrease.
c. Required new funds decrease as profit margins increase.
d. As the tax rate increases, the required new funds increase.
A