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Submitted By xiaoyaodashao
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Chapter 4

Financial Forecasting

Discussion Questions

|4-1. |What are the basic benefits and purposes of developing pro forma statements and a cash budget? |
| | |
| |The pro-forma financial statements and cash budget enable the firm to determine its future level of asset needs and the|
| |associated financing that will be required. Furthermore, one can track actual events against the projections. Bankers |
| |and other lenders also use these financial statements as a guide in credit decisions. |
| | |
|4-2. |Explain how the collections and purchases schedules are related to the borrowing needs of the corporation. |
| | |
| |The collections and purchase schedules measure the speed at which receivables are collected and purchases are paid. To |
| |the extent collections do not cover purchasing costs and other financial requirements, the firm must look to borrowing |
| |to cover the deficit. |
| | |
|4-3. |With inflation, what are the implications of using LIFO and FIFO inventory methods? How do they affect the

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