Financial Planning & Forecasting Flashcards

A company's sales last year were $500,000. Using a 12% growth rate, what is the projected sales figure for next year?

Answer: $560,000

$500,000 × 1.12 = $560,000.

Which forecasting method uses the average of all historical data points, giving equal weight to each period?

Answer: Simple moving average

A simple moving average assigns equal weight to each period included in the average.

In a cash flow forecast, which of the following is classified as a capital expenditure outflow?

Answer: Purchase of new machinery

Capital expenditures are long-term asset purchases such as machinery, not day-to-day operating costs.

A master budget is best described as:

Answer: A comprehensive set of budgets covering all aspects of a business

The master budget consolidates all sub-budgets (sales, production, cash, etc.) into one integrated plan.

If fixed costs are $80,000 and the contribution margin ratio is 40%, what sales revenue is required to break even?

Answer: $200,000

Break-even sales = Fixed costs ÷ CM ratio = $80,000 ÷ 0.40 = $200,000.

Which term describes the difference between budgeted revenue and actual revenue when actual is lower than budget?

Answer: Adverse variance

An adverse (unfavorable) variance occurs when actual revenue falls below the budgeted amount.

A rolling forecast differs from a static annual budget because it:

Answer: Is continuously updated to extend the planning horizon as time passes

Rolling forecasts are regularly revised to maintain a constant forward-looking period, unlike fixed annual budgets.