chapter 4

Question 1

financial forecasting

Answer 1

thinking about the future

Question 2

financial forecasting is making

Answer 2

pro forma statements

Question 3

default assumptions about account changes are based on assumptions of

Answer 3

profit margin and total asset turnover

Question 4

what items on B/S do not necessarily vary with sales because they depend on management decisions about capital structure

Answer 4

notes payable, LT debt, common share equity

Question 5

there is a direct relationship between ____ & ____ that is required to fund that growth

Answer 5

growth and external financing

Question 6

for pro forma financial statements always do these 2 steps

Answer 6

start with a growth rate
end with calculating EFN

Question 7

at low growth levels, does interal (R/E) exceed or not the required investments in assets

Answer 7

exceeds, EFN would be negative

Question 8

growth rate increases, internal (R/E) may not be enough to pay for new assets and need to….

Answer 8

go into financial market for money
EFN would be positive