Question

1) Which statement is not used in Financial forecasting?

	a.	Projected Financing Surplus or Deficit
	b.	Projected Balance Sheet
	c.	Projected Cash Flow Statement
	d.	Projected Income Statements

2) Which variable is not include in the AFN:

	a.	Payout ratio
	b.	Retention ratio
	c.	Profit Margin
	d.	Capital Intensity ratio

3) Which is not an alternative to paying special dividends?

	a.	Increase debt
	b.	Purchase marketable securities
	c.	Repay debt
	d.	Repurchase stock

4) It is not necessary to establish a preliminary financial policy in forecasting financial items.

True

False

5) The higher the firm's spontaneous liabilities, the higher AFN will be.

True

False

Answer 1

Solution:

Q1.

In financial forecasting we uses Income statement, Cash flow statement and Balance Sheet statement. Projected surplus or deficit is used in budgeting

Corrrect answer is A) Projected Financing Surplus or Deficit

Q2.

In AFN we use Retention ratio, payout ratio and profit margin but we dont require capital intensity ratio.

Hence correct option is

D.) Capital Intensity ratio

Q3.

In paying special dividend the company is actually paying the excess cash.

Option A ) Increase debt - It is opposite to paying the dividend while other three option are similar to paying the special dividend ( Cash outflow is there in all options)

Q4.

It is not necessary to establish a preliminary financial policy in forecasting financial items.

False: This statement is false as the company should have a basic preliminar policy .

Q. 5

The higher the firm's spontaneous liabilities, the higher AFN will be

This statement is false

AFN = Projected increase in assets – spontaneous increase in liabilities – any increase in retained earnings

Ans: False