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Chapter 9 Prospective Analysis

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Submitted By Darthraven11
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Chapter 09
Prospective Analysis

Multiple Choice Questions 1. When preparing a projected income statement, which of the following additional information, other then the financial statements would probably not be relevant?
A. The competitive environment
B. New versus old store mix
C. Expected capital expenditure
D. Expected level of macroeconomic activity 2. The reliability of a short-term cash forecast depends most heavily on the quality of:
A. Cost of goods sold forecast
B. Current ratio forecast
C. Sales forecast
D. Shares outstanding forecast 3. What is the correct order of the following steps in preparing a projected income statement (not all steps may be shown)?
I. Project future net sales
II. Project future net income
III. Project future cost of goods sold
IV. Project future interest expense
A. I, II, III, IV
B. II, IV, III, I
C. I, III, II, IV
D. I, III, IV, II

4. What is the correct order of the following steps in preparing a projected balance sheet (not all steps may be shown)?
I. Project future cash
II. Project future accounts receivable
III. Project future accounts payable
IV. Project future property plant and equipment
A. I, II, IV, III
B. II, IV, III, I
C. I, III, II, IV
D. I, III, IV, II The treasurer of Simmons Corporation, a newly formed software company is trying to ascertain Simmons cash flows for the next three months. Expected sales are:

50% of sales are made for cash. Simmons expects to receive 25% in the month following the sale and 20% in the second month following the sale. The remaining 5% are expected to be un-collectible. Gross margin is 20%, and purchases are made one month prior to sale. Purchases are paid one month after received. 5. The cash inflows in March from sales will be:
A. $250
B. $245
C. $220
D. None of the above 6. Cash outflows in March for

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