10.1 Financial Forecasting Introduction
Assessment Section 1
1
1/1
Which of the following questions cannot be estimated by financial forecasting?
Correct
How much have we made in the past?
How much will we need to finance a project?
How much DFN is needed?
How much will our sales be in the future?
Historical financial statements show how much we have made in the past—this does not
need to be forecasted.
2
1/1
Why is it important to use accurate estimates for financial forecasting?
To form accurate projected sales and financing needs
To see what complications or challenges arise from today’s decisions
To avoid GIGO
Correct
All of these choices
All of these options are reasons mentioned in the text that it is important to use accurat
estimates as inputs for financial forecasting.
3
1/1
Growth is only financed by increased revenue.
True
Correct
False
Growth requires increased investment in the firm in the form of retained earnings or
external equity or debt.
, 4
1/1
DFN stands for _______.
Depreciated Fixed Notes
Discounted Federal Notes
Correct
Discretionary Financing Needed
Disciplined Financial Needs
DFN stands for Discretionary Financing Needed or Discretionary Financing Need.
10.2 Percent of Sales Method: Steps 1 and 2
Assessment Section 1
1
1/1
Which of the following is NOT a step included in the percent of sales method?
Project sales revenues and expenses
Forecast change in spontaneous balance sheet accounts
Deal with discretionary accounts
Correct
Secure financing for project
The steps are as follows:
1. Project sales revenues and expenses
2. Forecast change in spontaneous balance sheet accounts
3. Deal with discretionary accounts
4. Calculate retained earnings (RE)
5. Determine total financing need/assets
6. Calculate DFN
2
, 1/1
If the company’s asset accounts increase, which of the following needs to happen?
Correct
Liability or equity accounts must increase by the same amount.
The company must change its current collection standards to keep up with demand.
All asset accounts cannot increase at the same time.
The company’s net income must increase also.
The balance sheet must balance, so if assets go up, then the sum of liabilities and equity
must go up as well.
3
1/1
Forecasting projected sales revenues and expenses is the final step in financial forecasting.
True
Correct
False
Computing DFN is the last step.
4
1/1
What is the first step in the percent of sales process?
Choose spontaneous accounts
Compute retained earnings
Calculate DFN
Correct
Project future sales
The steps are as follows:
1. Project sales revenues and expenses
2. Forecast change in spontaneous balance sheet accounts
3. Deal with discretionary accounts
4. Calculate retained earnings (RE)
Assessment Section 1
1
1/1
Which of the following questions cannot be estimated by financial forecasting?
Correct
How much have we made in the past?
How much will we need to finance a project?
How much DFN is needed?
How much will our sales be in the future?
Historical financial statements show how much we have made in the past—this does not
need to be forecasted.
2
1/1
Why is it important to use accurate estimates for financial forecasting?
To form accurate projected sales and financing needs
To see what complications or challenges arise from today’s decisions
To avoid GIGO
Correct
All of these choices
All of these options are reasons mentioned in the text that it is important to use accurat
estimates as inputs for financial forecasting.
3
1/1
Growth is only financed by increased revenue.
True
Correct
False
Growth requires increased investment in the firm in the form of retained earnings or
external equity or debt.
, 4
1/1
DFN stands for _______.
Depreciated Fixed Notes
Discounted Federal Notes
Correct
Discretionary Financing Needed
Disciplined Financial Needs
DFN stands for Discretionary Financing Needed or Discretionary Financing Need.
10.2 Percent of Sales Method: Steps 1 and 2
Assessment Section 1
1
1/1
Which of the following is NOT a step included in the percent of sales method?
Project sales revenues and expenses
Forecast change in spontaneous balance sheet accounts
Deal with discretionary accounts
Correct
Secure financing for project
The steps are as follows:
1. Project sales revenues and expenses
2. Forecast change in spontaneous balance sheet accounts
3. Deal with discretionary accounts
4. Calculate retained earnings (RE)
5. Determine total financing need/assets
6. Calculate DFN
2
, 1/1
If the company’s asset accounts increase, which of the following needs to happen?
Correct
Liability or equity accounts must increase by the same amount.
The company must change its current collection standards to keep up with demand.
All asset accounts cannot increase at the same time.
The company’s net income must increase also.
The balance sheet must balance, so if assets go up, then the sum of liabilities and equity
must go up as well.
3
1/1
Forecasting projected sales revenues and expenses is the final step in financial forecasting.
True
Correct
False
Computing DFN is the last step.
4
1/1
What is the first step in the percent of sales process?
Choose spontaneous accounts
Compute retained earnings
Calculate DFN
Correct
Project future sales
The steps are as follows:
1. Project sales revenues and expenses
2. Forecast change in spontaneous balance sheet accounts
3. Deal with discretionary accounts
4. Calculate retained earnings (RE)
