Foundations of Financial Management |
Chapter 4 & 5 Terms 2024/2025 Exam All
Answers and Illustrations Given
pro forma income statement - 🧠ANSWER ✔✔a projection of anticipated
sales, expenses and income
cash budget - 🧠ANSWER ✔✔a series of monthly or quarterly budgets that
indicate cash receipts, cash payments, and the borrowing requirements for
meeting financial requirements. it is constructed from the pro forma income
statement and other supportive schedules
pro forma balance sheet - 🧠ANSWER ✔✔a projection of future asset,
liability and stockholders' equity levels. notes payable or cash is used as a
plug or balancing figures for the statement
cost of goods sold - 🧠ANSWER ✔✔the cost specifically associated with
units sold during the time period under study
percent-of-sales method - 🧠ANSWER ✔✔a method of determining future
financial needs that is an alternative to the development of pro forma
statements. we first determine the percentage relationship of various asset
COPYRIGHT©NINJANERD 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. PRIVACY 1
STATEMENT. ALL RIGHTS RESERVE
, and liability accounts to sales, and then we show how that relationship
changes as our volume of sales changes.
leverage - 🧠ANSWER ✔✔the use of fixed-charge items with the intent of
magnifying the potential returns to the firm
operating leverage - 🧠ANSWER ✔✔a reflection of the extent to which fixed
asset and fixed costs are utilized in the business firm
contribution margin - 🧠ANSWER ✔✔the contribution to fixed costs from
each unit of sales. the margin may be computed as price minus variable
cost per unit
degree of operating leverage - 🧠ANSWER ✔✔a measure of the impact of
fixed costs on the operating earnings of the firm. the percentage change in
operating income is divided by the percentage change in volume at a given
level of operation. other algebraic statements are also used, such as
Formula5-3 and that in footnote 2 in chapter 5
financial leverage - 🧠ANSWER ✔✔a measure of the amount of debt used
in the capital structure of the firm
degree of financial leverage (DFL) - 🧠ANSWER ✔✔a meausre of the
impact of debt on the earnings capability of the firm. the percentage change
in earnings per share is divided by the percentage change in earnings
COPYRIGHT©NINJANERD 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. PRIVACY 2
STATEMENT. ALL RIGHTS RESERVE
Chapter 4 & 5 Terms 2024/2025 Exam All
Answers and Illustrations Given
pro forma income statement - 🧠ANSWER ✔✔a projection of anticipated
sales, expenses and income
cash budget - 🧠ANSWER ✔✔a series of monthly or quarterly budgets that
indicate cash receipts, cash payments, and the borrowing requirements for
meeting financial requirements. it is constructed from the pro forma income
statement and other supportive schedules
pro forma balance sheet - 🧠ANSWER ✔✔a projection of future asset,
liability and stockholders' equity levels. notes payable or cash is used as a
plug or balancing figures for the statement
cost of goods sold - 🧠ANSWER ✔✔the cost specifically associated with
units sold during the time period under study
percent-of-sales method - 🧠ANSWER ✔✔a method of determining future
financial needs that is an alternative to the development of pro forma
statements. we first determine the percentage relationship of various asset
COPYRIGHT©NINJANERD 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. PRIVACY 1
STATEMENT. ALL RIGHTS RESERVE
, and liability accounts to sales, and then we show how that relationship
changes as our volume of sales changes.
leverage - 🧠ANSWER ✔✔the use of fixed-charge items with the intent of
magnifying the potential returns to the firm
operating leverage - 🧠ANSWER ✔✔a reflection of the extent to which fixed
asset and fixed costs are utilized in the business firm
contribution margin - 🧠ANSWER ✔✔the contribution to fixed costs from
each unit of sales. the margin may be computed as price minus variable
cost per unit
degree of operating leverage - 🧠ANSWER ✔✔a measure of the impact of
fixed costs on the operating earnings of the firm. the percentage change in
operating income is divided by the percentage change in volume at a given
level of operation. other algebraic statements are also used, such as
Formula5-3 and that in footnote 2 in chapter 5
financial leverage - 🧠ANSWER ✔✔a measure of the amount of debt used
in the capital structure of the firm
degree of financial leverage (DFL) - 🧠ANSWER ✔✔a meausre of the
impact of debt on the earnings capability of the firm. the percentage change
in earnings per share is divided by the percentage change in earnings
COPYRIGHT©NINJANERD 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. PRIVACY 2
STATEMENT. ALL RIGHTS RESERVE
