D076 Lesson Tests

When can the discretionary financing needed (DFN) be determined? - After pro-forma financial statements are forecasted using the percent of sales method When evaluating a company's performance, what can variances on a company's cash budget indicate? - Variances show that certain managers or divisions are not meeting targets. How far into the future do cash budgets usually forecast? - Between one month and one year What are three principles of budgeting that are important to know before beginning the budgeting process? - Keep records; develop savings, income, and expense strategies; and use a method that meets your needs and objectives What are the three main uses of cash budgets? - Cash budgets are used to forecast future financial need, aid in performance evaluation, and show when corrective action is needed. Determine cash receipts, estimate cash disbursements, create the cash budget - What is the correct order of the three steps necessary to create a cash budget? Because it is specific and measurable - Why is "put $50 in a savings account each month for Christmas gifts" a better budgeting goal than "save money for Christmas gifts"? Because the payment is the same amount each month - Why would a monthly mortgage payment be considered a fixed expense? Compare your budgeted cash flows to your actual cash flows, and then revise the budget if necessary - Which action would help you make your budget more efficient?