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4.4   Discuss the cash-planning process and the preparation, evaluation, and

Question : 4.4   Discuss the cash-planning process and the preparation, evaluation, and : 1415008

 

4.4   Discuss the cash-planning process and the preparation, evaluation, and use of the cash budget.

1) The more seasonal and uncertain a firm's cash flows, the greater the number of intervals and the shorter time intervals.

2) An internal sales forecast is based on the relationships that can be observed between a firm's sales and certain key economic indicators such as the gross domestic product, new housing starts, or disposable personal income.

3) The ________ is a financial projection of a firm's short-term cash surpluses or shortages.

A) operating financial plan

B) cash budget

C) strategic financial journal

D) capital assets journal

4) The primary purpose in preparing a cash budget is ________.

A) to evaluate the intrinsic value of a financial assets

B) to estimate a firm's short-term cash requirements

C) for risk analysis

D) to estimate sales

5) Cash budget is a statement of a firm's planned inflows and outflows of cash that is used to estimate its long-term cash requirement.

6) Cash planning involves the preparation of a firm's cash budget. Without adequate cash—regardless of the level of profits—any firm could fail.

7) Cash budgets and pro forma statements are useful not only for internal financial planning but also are routinely required by the Internal Revenue Service (IRS).

8) A cash budget gives the financial manager a clear view of the timing of a firm's expected profitability over a given period.

9) Since depreciation and other noncash charges represent a scheduled write-off of an earlier cash outflow, they should not be included in a cash budget.

10) In cash budgeting, the impact of depreciation is reflected in a reduction in tax payments.

 

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