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D076 Test Answers RATED A+
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A company calculated variances of a budget and actual cash flows that indicate the firm's strengths and weaknesses in cash flows and its budgeting process. Which major use of cash budgeting is this an example of? Standardization Assessment of future needs Corrective action Performance evaluat...

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  • February 3, 2024
  • 13
  • 2023/2024
  • Exam (elaborations)
  • Questions & answers

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D076 Test Answers RATED A+
A company calculated variances of a budget and actual cash flows that indicate the firm's strengths and
weaknesses in cash flows and its budgeting process.

Which major use of cash budgeting is this an example of?

Standardization

Assessment of future needs

Corrective action

Performance evaluation - ✔✔Performance evaluation



A company is developing a financial forecast for the next year. The company plans to implement a new
factory that will increase production and resulting sales by 20%.

Since the company's assets are increasing significantly, what else must increase?

Profit turnover

Accounts receivable turnover

Financing

Gross margin - ✔✔Financing



A financial manager at a company is trying to determine whether to issue new stocks or new bonds to
cover the costs of a project the company is doing the next year.

Which main task in business finance is this situation an example of?

Making financing decisions

Making investment decisions

Managing interdepartmental loans - ✔✔Making financing decisions



A firm is currently operating at 75% capacity with current sales of $34 million.

Will the firm need to acquire additional fixed assets if its sales are predicted to increase by $6 million
next year?

, No, because the increase in sales will exceed the firm's sales capacity.

Yes, because the increase in sales will exceed the firm's sales capacity.

Correct

No, because the increase in sales will not exceed the firm's sales capacity. - ✔✔No, because the
increase in sales will not exceed the firm's sales capacity.



A pharmaceutical company recently spent $2 million developing a new drug. The company then
conducts capital budgeting analysis to determine if it should produce the newly developed drug. The net
present value (NPV) of the project is $1.5 million.

Why should this company produce the drug?

Because the project will provide a total value of $3.5 million to the company

Because the NPV is greater than zero

Because the development costs are greater than the value of the project - ✔✔Because the NPV is
greater than zero



A sign company is planning to have an initial public offering (IPO). In which type of market will its stock
first be sold to the public?

Efficient market

Secondary market

Money market

Primary market - ✔✔Primary market



An employee was recently hired as a financial analyst and asked to create a cash budget for the
employee's division for the next year.

Which component should the employee exclude from the budget?

Payment toward the line of credit that is due next month

Purchase of equipment that will be bought in three years

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