Financial Planning and Forecasting Course Quiz
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Questions and Answers

What is the main purpose of a strategic plan?

  • To assess employee performance
  • To establish the direction of an organization (correct)
  • To determine annual profit margins
  • To outline the organizational hierarchy

    • Which year had the highest net sales according to the sales forecast?

  • 201e
  • 201d
  • 201c
  • 201f (correct)

    • What does the AFN equation help determine?

  • The additional funds needed for company expansion (correct)
  • The total revenue for the next fiscal year
  • The current asset valuation
  • The expected cash flow in the upcoming months

    • How do financial forecasts differ from historical financial statements?

    <p>Forecasts project future financial situations whereas historical statements show past performance</p> Signup and view all the answers

    What is one component that is not part of a strategic plan?

    <p>Sales Revenue</p> Signup and view all the answers

    What is the inventory conversion period for GFI?

    <p>60 days</p> Signup and view all the answers

    Which of the following best describes the average collection period (ACP) for GFI?

    <p>60 days</p> Signup and view all the answers

    What is the duration of the payables deferral period for GFI?

    <p>40 days</p> Signup and view all the answers

    How long does it take for GFI to convert merchandise into cash after making a purchase?

    <p>120 days</p> Signup and view all the answers

    How does the length of the average collection period affect GFI's cash flow?

    <p>It lengthens the cash flow cycle.</p> Signup and view all the answers

    Which financing policy involves using more short-term sources to finance permanent assets?

    <p>Aggressive approach</p> Signup and view all the answers

    What financing strategy does a firm adopt when it cannot match assets with liabilities?

    <p>Conservative financing policy</p> Signup and view all the answers

    What does the Cash Conversion Cycle (CCC) measure?

    <p>Time taken to convert investments into cash flows</p> Signup and view all the answers

    If Great Fashions Inc. purchases P5,500,000 in merchandise, when are they expected to pay their suppliers?

    <p>After 40 days</p> Signup and view all the answers

    How long does Great Fashions Inc. plan to sell their merchandise after purchase?

    <p>60 days</p> Signup and view all the answers

    Which financing policy involves using primarily long-term sources for asset acquisition?

    <p>Conservative approach</p> Signup and view all the answers

    What is a characteristic of an aggressive financing policy?

    <p>Relies heavily on short-term borrowing</p> Signup and view all the answers

    In a conservative financing policy, how is short-term finance utilized?

    <p>Partially for temporary current assets</p> Signup and view all the answers

    What is the formula used to calculate net working capital?

    <p>Current Assets - Current Liabilities</p> Signup and view all the answers

    Which of the following represents net operating working capital?

    <p>Operating Current Assets - Operating Current Liabilities</p> Signup and view all the answers

    What does the term 'working capital' historically refer to according to the peddler analogy?

    <p>The merchandise a peddler sold to generate profits</p> Signup and view all the answers

    How does the turnover of working capital affect a peddler's profitability?

    <p>Faster turnover increases profits due to more sales</p> Signup and view all the answers

    Which of the following is a component of current liabilities?

    <p>Accounts payable</p> Signup and view all the answers

    Current assets do NOT include which of the following?

    <p>Accounts payable</p> Signup and view all the answers

    What primarily determines working capital's impact on a company?

    <p>Investment policies related to current assets</p> Signup and view all the answers

    In the context of working capital, what aspect relates directly to a company's liquidity?

    <p>Net operating working capital</p> Signup and view all the answers

    What does the inventory conversion period indicate about GFI's merchandise?

    <p>It takes GFI 90 days to sell its merchandise.</p> Signup and view all the answers

    How is the inventory conversion period calculated for GFI?

    <p>By dividing inventory by cost of goods sold per day.</p> Signup and view all the answers

    What is the average collection period for GFI, also known as days sales outstanding (DSO)?

    <p>90 days</p> Signup and view all the answers

    Which of the following is true regarding the data used to compute the average collection period for GFI?

    <p>It uses annual sales in the denominator.</p> Signup and view all the answers

    What does a difference between the actual CCC and the forecasted value indicate?

    <p>Real-world complexities affect cash flow cycles.</p> Signup and view all the answers

    What financial metric is used as the basis for the denominator when calculating the inventory conversion period?

    <p>Cost of goods sold</p> Signup and view all the answers

    In the context of GFI's financial situation, what does it mean if the company has a long inventory conversion period?

    <p>The company faces challenges in selling merchandise.</p> Signup and view all the answers

    What common mistake might someone make regarding the calculation of the average collection period?

    <p>Using cost of goods sold instead of sales.</p> Signup and view all the answers

    What is the payables deferral period for GFI?

    <p>54 days</p> Signup and view all the answers

    What is the difference between GFI's actual cash conversion cycle (CCC) and the planned CCC?

    <p>46 days</p> Signup and view all the answers

    How is GFI's actual cash conversion cycle (CCC) calculated?

    <p>Sales days + Collection days - Payable days</p> Signup and view all the answers

    What should the CFO of GFI focus on to improve the company's cash conversion cycle?

    <p>Speed up sales and accelerate collections</p> Signup and view all the answers

    What is a primary purpose of a cash budget for firms?

    <p>To forecast future cash receipts and disbursements</p> Signup and view all the answers

    What characteristic is typical for a cash budget developed by firms?

    <p>It's often created in daily and monthly formats</p> Signup and view all the answers

    Which factor contributes to GFI's longer than planned cash conversion cycle?

    <p>Delayed supplier payments</p> Signup and view all the answers

    What action could potentially improve GFI's profits and stock price?

    <p>Extending payment terms with suppliers</p> Signup and view all the answers

    What percentage of the current month's sales are collected during the month of sale?

    <p>20%</p> Signup and view all the answers

    How much are the purchases calculated based on the next month's sales?

    <p>$280,000,000</p> Signup and view all the answers

    What is the total amount of payments made for wages and salaries in the second month?

    <p>$50,000,000</p> Signup and view all the answers

    What is the net cash flow (NCF) for the month with $400,000,000 in total collections?

    <p>$43,600,000</p> Signup and view all the answers

    During which month are collections from the prior month's sales received?

    <p>First month after sales</p> Signup and view all the answers

    What is the total amount collected from sales during the second month after sales?

    <p>$40,000,000</p> Signup and view all the answers

    What are the total payments made during the month that has $500,000,000 sales?

    <p>$230,000,000</p> Signup and view all the answers

    How much are the lease payments made each month?

    <p>$15,000,000</p> Signup and view all the answers

    What total collections are recorded for the month after $250,000,000 in sales?

    <p>$313,400,000</p> Signup and view all the answers

    What is accounted for in the total payments made in the month immediately following $300,000,000 in sales?

    <p>Materials, wages, and other expenses</p> Signup and view all the answers

    Study Notes

    Financial Planning and Forecasting

    • This course covers strategic planning, sales forecasting, the AFN equation, forecasted financial statements, and associated tasks, homework, and online learning tools.

    Strategic Planning

    • A strategic plan outlines an organization's direction.
    • It includes:
      • Mission Statement
      • Corporate Scope
      • Statement of Corporate Objectives
      • Corporate Strategies
      • Operating Plan
      • Financial Plan

    The Sales Forecast

    • Shows projected net sales for future periods.
    • Data for 201a-201f are provided.

    The AFN Equation

    • AFN (Additional Funds Needed) calculates extra financial resources needed for expansion.
    • Components include:
      • Projected increase in assets
      • Spontaneous increase in liabilities
      • Increase in retained earnings

    Forecasted Financial Statements

    • Historical statements show past performance.

    • Forecasts project a future financial situation.

    • Performance Task 1: Students must complete a task based on financial planning and forecasting concepts.

    • Homework 1: Students need to submit homework before the final exam.

    • eLMS Quiz 1: Online quiz covering financial planning and forecasting topics.

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    Description

    Test your understanding of financial planning and forecasting concepts, including strategic planning, sales forecasting, the AFN equation, and forecasted financial statements. This quiz covers key components necessary for effective financial management. Prepare to demonstrate your knowledge in these fundamental areas!

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