42 Review Questions

Chapter 4 Review Questions

1. Javier’s firm has created a forecasted income statement that shows the firm with a net profit of $25,000 for the coming year. What can we assume about Javier’s cash flows?

2. Lulu’s firm’s sales grew by 9%, 11%, and 10% over the past three years, respectively. Lulu wants to take her first pass at forecasting sales for next year. What percent sales growth would you recommend she use, and why?

3. Aria wants to create a set of pro forma financial statements. Her goal is to plan for future cash flows and operations as well as help envision her long-term strategy. What time frames should Aria consider for her operations and cash flows versus her long-term strategy?

4. What information might you use to calculate the ending balance for retained earnings on a forecasted balance sheet?

5. Damon estimates his beginning cash balance for June to be $10,000, with cash inflows of $4,000 and cash outflows of $6,000 for the month. What is Damon’s forecasted ending balance for June?

6. Tanneh wants to use an Excel formula to help her estimate sales for January in her forecasted income statement. She already has her sales estimate for the full year. Assuming she wants to use the past year’s income statement percentages to forecast next year’s sales, how would she calculate estimated sales for January?