Category Archives: Budget and Planning Questions

Since the budget period normally coincides with the accounting period, budgets of less than one year or greater than one year are not normally prepared. | Budget and Planning Questions

A. True B. False Ans: B

Posted in Budget and Planning Questions | Leave a comment

Most successful businesses generally prepare their budgets from ‘the top down’. These budgets are tightly controlled by upper management. | Budget and Planning Questions

A. True B. False Ans: B

Posted in Budget and Planning Questions | Leave a comment

The task of preparing the budget normally is the responsibility of one department, the controller’s department or a department of one of the high-level managers. | Budget and Planning Questions

A. True B. False Ans: B

Posted in Budget and Planning Questions | Leave a comment

The budgeting process can be used to promote a positive effect on employees’ attitudes, but it can also yield a negative one. | Budget and Planning Questions

A. True B. False Ans: a

Posted in Budget and Planning Questions | Leave a comment

The process of planning future business actions and expressing those plans in a formal manner, usually in monetary terms, is called budgeting. | Budget and Planning Questions

A. True B. False Ans: A

Posted in Budget and Planning Questions | Leave a comment

Accounts payable represent a spontaneous form of financing for a firm. | Budget and Planning Questions

A. True B. False Ans: a

Posted in Budget and Planning Questions | Leave a comment

To determine the amount of discretionary funds needed, you would subtract the expected increase in liabilities from the sum of the expected increases in retained earnings and assets. | Budget and Planning Questions

a. True b. False Ans: b

Posted in Budget and Planning Questions | Leave a comment

The Stuff Antique Store has current sales of $12 million and predicts next year’s sales will grow to $16 million. Current assets are $3 million and fixed assets are $4 million. The firm’s net profit margin is 6 percent after taxes. Presently, Stuff has $800,000 in accounts payable, $1.1 million in long-term debt, and $5 million (including $2.5 million in retained earnings) in common equity. Next year, Stuff projects that current assets and liabilities will rise in direct proportion to the forecasted sales, and that fixed assets will rise by $600,000. The Stuff Antique Store plans to pay dividends of $400,000 to common shareholders. What are Stuff’s total financing needs and discretionary financing needs for the upcoming year? | Budget and Planning Questions

A. $8.6 million and $.27 million. B. $7.5 million and $.25 million. C. $6.5 million and $.15 million. D. $5.5 million and $.45 million. Ans: a

Posted in Budget and Planning Questions | Leave a comment

The first step involved in predicting financing needs is: | Budget and Planning Questions

a. project the firm’s sales revenues and expenses over the planning period. b. estimating the levels of investment in current and fixed assets that are necessary to support the projected sales. c. determining the firm’s financing needs throughout the planning … Continue reading

Posted in Budget and Planning Questions | Leave a comment

A firm is using the DFN model to forecast the additional capital that they need to raise because of a sales increase. Which of the following factors are likely to increase the DFN? | Budget and Planning Questions

a. The firm has a lot of excess capacity. b. The firm has a high dividend payout ratio. c. The firm has a lot of spontaneous liabilities that increase as sales increase. d. The firm has a high profit margin. … Continue reading

Posted in Budget and Planning Questions | Leave a comment