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A company calculated variances of a budget and actual cash flows that indicate the firm's strengths and weaknesses in cash flows and its budgeting process. Which major use of cash budgeting is this an example of? -Assessment of future needs -Performance evaluation -Standardization -Corrective action - Performance evaluation A company is developing a financial forecast for the next year. The company plans to implement a new factory that will increase production and resulting sales by 20%. Since the company's assets are increasing significantly, what else must increase? -Gross margin -Profit turnover -Financing -Accounts receivable turnover - Financing A financial manager at a company is trying to determine whether to issue new stocks or new bonds to cover the costs of a project the company is doing the next year. Which main task in business finance is this situation an example of? -Managing interdepartmental loans -Making investment decisions -Managing working capital -Making financing decisions - Making financing decisions A firm is currently operating at 75% capacity with current sales of $34 million. Will the firm need to acquire additional fixed assets if its sales are predicted to increase by $6 million next year? -Yes, because the increase in sales will exceed the firm's sales capacity. -Yes, because the increase in sales will not exceed the firm's sales capacity. -No, because the increase in sales will exceed the firm's sales capacity. -No, because the increase in sales will not exceed the firm's sales capacity. - No, because the increase in sales will not exceed the firm's sales capacity. A pharmaceutical company recently spent $2 million developing a new drug. The company then conducts capital budgeting analysis to determine if it should produce the newly developed drug. The net present value (NPV) of the project is $1.5 million. Why should this company produce the drug? -Because the NPV is greater than zero -Because the development costs are greater than the value of the project -Because the losses due to cannibalization are less than the value of the project -Because the project will provide a total value of $3.5 million to the company - Because the NPV is greater than zero A sign company is planning to have an initial public offering (IPO). In which type of market will its stock first be sold to the public? -Money market -Secondary market -Primary market -Efficient market - Primary Market An employee was recently hired as a financial analyst and asked to create a cash budget for the employee's division for the next year. Which component should the employee exclude from the budget? -Payments to suppliers that will be made over the next six months -Purchase of inventory for sales that the employee will make this year -Purchase of equipment that will be bought in three years -Payment toward the line of credit that is due next month - Purchase of equipment that will be bought in three years