CAT Financial Planning & Forecasting 4

Question 1

A company forecasts it will collect 70% of credit sales in the month of sale and 30% in the following month. If November credit sales are $100,000, how much cash is collected in December from November sales?

Accepted Answer

$30,000

Answer

30% of November's $100,000 credit sales = $30,000 collected in December.

Question 2

Sensitivity analysis in financial planning is used to:

Accepted Answer

Assess how changes in key assumptions affect financial outcomes

Answer

Sensitivity analysis tests how sensitive a forecast or plan is to changes in one or more key input variables.

Question 3

Which of the following best describes the purpose of a financial plan?

Accepted Answer

To set measurable financial targets and outline the resources needed to achieve them

Answer

A financial plan establishes targets and maps out the funding and activities required to reach them.

Question 4

If a company's closing inventory budget is $40,000, opening inventory is $30,000, and budgeted cost of sales is $150,000, what is the budgeted purchases figure?

Accepted Answer

$160,000

Answer

Purchases = Cost of sales + Closing inventory – Opening inventory = $150,000 + $40,000 – $30,000 = $160,000.

Question 5

Incremental budgeting is criticized mainly because it:

Accepted Answer

Encourages inefficiencies by automatically funding prior-year costs

Answer

Incremental budgeting simply adds to last year's figures, which can embed and perpetuate wasteful spending.

(CAT) Certified Accounting Technician Practice Test

(CAT) Certified Accounting Technician Practice Test

CAT Financial Planning & Forecasting 4