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Finance Flashcards

Managerial Finance: Chapter 4

Depreciation deductions, like any other business expenses, reduce the income that a firm reports on its income statement. True
One basic weakness of the simplified pro forma approaches lies in the assumption that the firm’s past financial condition is an accurate indicator of its future. True
The depreciable value of an asset, under MACRS, is ________. the full cost including installation costs
The cash flows from operating activities section of the statement of cash flows includes ________. labor expense
________ generally reflect(s) the anticipated financial impact of planned long-term actions. Strategic financial plans
Of the following components of a cash budget, generally the easiest to estimate would be the ________. cash disbursements
In the next planning period, a firm plans to change its policy of all cash sales and initiate a credit policy requiring payment within 30 days. The statements that will be directly affected immediately are the ________. pro forma balance sheet and cash budget
The firm has a negative net cash flow in the month(s) of ________. (See Table 4.3) January and February
During 2015, NICO Corporation had EBIT of $100,000, a change in net fixed assets of $400,000, an increase in net current assets of $100,000, an increase in spontaneous current liabilities of $400,000, a depreciation expense of $50,000, and a tax rate of 30%. Based on this information, NICO’s free cash flow is ________. -$30,000
In the month of August, a firm had total cash receipts of $10,000, total cash disbursements of $8,000, depreciation expense of $1,000, a minimum cash balance of $3,000, and a beginning cash balance of $500. The ending cash balance for August totals ________. $2,500
A financial planning process begins with short-term, or operating, plans and budgets that in turn guide the formulation of long-term, or strategic, financial plans. False
In the development of pro forma statements, a firm that requires external funds means that its projected level of cash is in excess of its needs and that funds would therefore be available for repaying debt, repurchasing stock, or increasing the dividend to stockholders. False
Allocation of the historic costs of fixed assets against the annual revenue they generate is called ________. depreciation
Which of the following is a cash outflow? an increase in accounts receivable
The key outputs of the short-term financial planning process are the ________. cash budget, pro forma income statement, and pro forma balance sheet
The primary purpose in preparing a cash budget is ________. to estimate a firm’s short-term cash requirements
A firm plans to retire outstanding bonds in the next planning period. Which of the following gets affected? pro forma income statement and pro forma balance sheet
Calculate a firm’s free cash flow if it has net operating profit after taxes of $60,000, depreciation expense of $10,000, net fixed asset investment requirement of $40,000, a net current asset requirement of $30,000 and a tax rate of 30%. $0
In the month of August, a firm had total cash receipts of $10,000, total cash disbursements of $8,000, depreciation expense of $1,000, a minimum cash balance of $3,000, and a beginning cash balance of $500. At the end of August, the firm ________. required total financing of $500
Generally, firms that are subject to high degrees of operating uncertainty, relatively short production cycles, or both, tend to use shorter planning horizons. True
Cash planning involves the preparation of a firm’s cash budget. Without adequate cash regardless of the level of profits any firm could fail. True
Given a financial manager’s preference for faster receipt of cash flows, ________ a shorter depreciable life is preferred to a longer one
Which of the following is an example of noncash charges? depreciation
The key outputs of the short-term financial planning process are the ________. cash budget, pro forma income statement, and pro forma balance sheet
A projected excess cash balance for a month may be ________. invested in marketable securities
________ are projected financial statements. Pro forma statements
In the month of August, a firm had total cash receipts of $10,000, total cash disbursements of $8,000, depreciation expense of $1,000, a minimum cash balance of $3,000, and a beginning cash balance of $500. The ending cash balance for August totals ________. $2,500

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