Test for current control 3

Describe the percent-of-sales method of financial forecasting.

• It assumes that balance sheet accounts maintain a constant relationship to sales
• It requires more time than a cash budget approach
• It is more detailed than a cash budget approach
• It provides a month-to-month breakdown of data

Find the statement that is true in the case of the percent-of-sales method.

• As the dividend payout ratio goes up, the required new funds also rise
• As the dividend payout ratio rises, required new funds decline
• The dividend payout ratio does not affect new funds
• A change to the ex-dividend date causes the required new funds to change

When using the percent-of-sales method in forecasting funds needed, which of the following is not true?

• Required new funds increase as accumulated amortization increases
• Required new funds decrease as profit margins increase
• As the dividend payout ratio decreases, the required new funds also decrease
• As the tax rate increases, the required new funds increase

In forecasting a firm's cash needs for a future period:

• a cash budget approach can deal effectively with both level and seasonal production schedules
• cash budgets are less exact than the percent-of-sales method
• a cash budget approach cannot deal effectively with both level and seasonal production schedules
• the percent-of-sales method is a detailed approach

What is a business risk?

• Risk which is related to future earnings of a company
• Risks that may derive from the bad work of workers
• Risks that may come from fixed costs only
• Risks that may come from variable costs only

What are operating risks?

• Risks that may derive from the fixed costs and variable costs that the firm incurs in order to operate
• Risk which is related to future earnings of a firm
• Risks from both fixed and variable finance costs that come from firm's capital structure
• Risks which may come from both economic instability of the country that the firm is operating in and the changes in preferences of people

Which of the following are variable costs?

• Direct labour cost, direct cost of materials, costs for electricity associated with the production
• Direct labour cost, payment for the rent of warehouse, costs for electricity associated with the production
• Salary for the Director of the firm, direct material cost, payment for the rent of warehouse
• Direct labour cost, direct cost of materials, cost from paying for patents

If a firm's total fixed cost is $3000, the variable cost per product is $10 and the price of a product is $20, find the break-even quantity.

• 300
• 100
• 200
• 150

What are semivariable costs?

• Costs that are fixed for a while and then rise sharply to a higher level as a higher outcome reached, remain fixed then rise again
• Costs that do not vary in total amount as quantity of output changes
• Costs that vary in total as output changes
• The total amount of the enterprise's expenses on paying wages to workers

What is financial leverage?

• Results from the firm's use of sources of financing that require a fixed rate of return
• Results from operating costs that are fixed and do not vary with the level of firm sales
• The result of the combined effects of both operating and capital leverage
• The total amount of the enterprise's expenses on paying wages to financial managers