Business Budgeting: Financial Planning

What is the primary focus when identifying cash flows in business budgeting?

Why is budgeting considered essential for a business's financial viability?

Which of the following best describes the purpose of an operational budget?

What is the significance of identifying the cash flow in business budgeting?

Why isn't Capital Cost Allowance (CCA) calculated for land?

What is the main difference between capital expenditure and operational budgets?

How does a business determine the optimal level of fixed asset investments?

Which of the following is the best example of 'Direct Materials' in the context of budgeting?

What is included in the 'Operational/Operating' component of a budget?

What is meant by 'Capital Cost Allowance'?

How would a business utilize a cash flow budget?

When is the salvage value of an asset considered in cash flow budgeting?

Which items are typically categorized under fixed overhead?

A company uses the Capital Cost Allowance (CCA) to reduce business taxable income. How is this achieved?

What does 'Financial Plan' refer to regarding business budgeting?

Which of the following actions would be best to include in a capital expenditure budget?

Which accounting values are most useful to evaluate the potential of a project?

What type of information is useful when determining if a business needs to create a budget?

What is the formula for net cash flow?

Which expenses are classified as variable overhead?

Which scenario best illustrates the practical application of financial planning for a new business?

What is the most important reason for performing a financial evaluation of a business or project?

How does depreciation and amortization affect net business income?

In the context of calculating net income, why is the year of purchase of a capital asset significant for Capital Cost Allowance (CCA)?

When projecting net income for a business, which of the following should be considered as part of the costs?

Why is it important to consider the salvage value of a capital asset when calculating net income over multiple years?

A business is evaluating whether to invest in new equipment. How would they use Net Present Value (NPV) to aid this decision?

How does a higher discount rate typically affect the present value of a future cash flow?

What does a Benefit-Cost Ratio (BCR) greater than 1 indicate about a project?

In Benefit Cost Ratio (BCR) analysis, what types of items are included as positive cash flows?

What does the Internal Rate of Return (IRR) represent?

If a project has an IRR of 15%, what does this indicate?

How is Net Working Capital (NWC) calculated, and what does it indicate?

What does a high Activity Ratio (COGS/Inventory Level) suggest about a business?

A company has a low Acid Test (Quick Ratio). What does this indicate about its financial health?

What does the Payback Period metric primarily measure?

Which aspect of a business does the Average Rate of Return (ARR) primarily evaluate?

A company has an activity ratio of 5, a current ratio of 1.2, and a quick ratio of 0.7. What can be said about the company's financial health?

Which financial evaluation metric is used to determine how well a company generates income relative to the total assets?

Which value calculated during financial evaluation is used to determine if revenue is sufficient to cover short-term debts?

What distinguishes a critical variable in financial planning, according to the presented definition?

In the context of financial planning, what is the primary aim of risk analysis?

When evaluating the feasibility of a financial plan, which question regarding cash flow is most important to consider?

What benchmark IRR (Internal Rate of Return) should a start-up business plan aim to generate?

Which of the following is an example of a common variable considered critical in determining a business's profitability?

A small change in a variable results in an IRR of 0%. How can you define this variable?

What does break-even analysis primarily help a business determine?

In the context of business survival, what is considered the most critical variable for short-term financial health in break-even analysis?

In scenario analysis, how are the 'best case' and 'worst case' scenarios typically created?

What is the purpose of conducting scenario analysis in financial planning?

A business is determining whether to work with Scenario 1, which determines true IRR for the business. What should they do?

What type of business is most likely to be risky?

What does 'Goal Seek' do in Excel in the context of financial planning?

What are the steps in financial planning reporting?

True or false: a critical variable is usually directly controllable by the business?

True or false: Break-even analysis is only done for non-critical variables?

If it takes a large change in a variable to get the IRR to equal 0%, how can we define this variable?

True or false: in scenario analysis, the critical variables never change?

What is risk analysis?

If the IRR is at 20% and the NPV is at 0 when the MARR is 20%, what does this mean for the business?

Why is maintaining the appropriate level of inventory crucial for a business?

A company implements a just-in-time (JIT) inventory system. What is a potential risk associated with this strategy?

How do constant ordering and holding costs affect the application of the Economic Order Quantity (EOQ) model?

A company finds that demand for its product is increasing while holding costs remain stable. According to the EOQ model, how should the company adjust its order quantity?

A retail store calculates that the order size to minimize cost is approximately 28 units based on the EOQ model. What does this indicate for the store's inventory management?

When calculating the dollar value of in-progress inventory, which costs are included?

A meat processing plant is considering hiring an inventory manager for $40,000 per year. This is expected to reduce average inventory by $250,000. The firm's cost of capital is 14%. Should the firm hire the inventory manager?

What action should a manager prioritize if a company's cash reserves begin to accumulate beyond what is necessary for operations?

Which scenario best describes the cash conversion cycle?

What should a company prioritize when establishing its accounts receivable (AR) credit policy?

What costs are potentially involved in offering a discount for early payment of invoices?

A company is considering offering a 2/10 net 30 discount. What does this mean for the company's accounts receivable policy?

What is the primary goal when managing accounts payable (AP)?

A company can either take a 2/10 net 30 discount or use a line of credit with an interest rate of 15% per annum. Assuming the company always pays on day 30 if it doesn't take the discount, what is the best course of action?

What does a shorter Cash Conversion Cycle (CCC) generally indicate about a company's operational efficiency?

How is the Cash Conversion Cycle (CCC) calculated?

What is a manager's primary objective related to the Cash Conversion Cycle (CCC)?

What does 'Working Capital' measure?

Which of the following accurately represents the formula for calculating Working Capital?

A pasta company has the following values: Raw Materials Inventory, $100,000. Finished Goods Inventory $120,000. Accounts Receivable $200,000. Accounts Payable $100,000. Over the course of the year, they have the respective days outstanding of 14, 14, 35, and 15. What is its Working Capital?

A small business has a liquidity (WC) of $5,000. What does this amount indicate about the business?

A company that sells wholesale pasta has the following information: Average Days Raw Durum Inventory = 14. Average Days Packaged Pasta Inventory = 14. Average Days Receivables = 35. Average Days Payables = 15. What is the cash conversion cycle?

In the context of Accounts Payable (AP), what does the term 'net 30' typically signify?

What is the goal of Accounts Receivable analysis?

What actions should a business consider in order to minimize the Cash Conversion Cycle (CCC)?