CAT Financial Planning & Forecasting 5

Question 1

In a scenario analysis for financial planning, which three scenarios are typically modeled?

Accepted Answer

Base case, best case, and worst case

Answer

Scenario analysis models a central (base), optimistic (best), and pessimistic (worst) set of assumptions.

Question 2

A company uses regression analysis and finds the equation y = 20,000 + 5x, where y = total cost and x = units produced. What is the total cost when 3,000 units are produced?

Accepted Answer

$35,000

Answer

y = 20,000 + (5 × 3,000) = 20,000 + 15,000 = $35,000.

Question 3

Which of the following would cause a business's cash forecast to show a surplus even when the profit forecast shows a loss?

Accepted Answer

High non-cash depreciation charges increasing the loss

Answer

Depreciation is a non-cash expense; it reduces profit but has no cash outflow, so adding it back in a cash forecast can reveal a cash surplus.

Question 4

A budget that adjusts to reflect the actual level of activity achieved is called a:

Accepted Answer

Flexed budget

Answer

A flexed budget is restated to the actual volume of activity to provide a fair basis for variance analysis.

Question 5

Which of the following is NOT typically included in an operating budget?

Accepted Answer

Capital expenditure on new equipment

Answer

Capital expenditure is included in the capital budget, not the operating budget, which covers day-to-day revenues and costs.

(CAT) Certified Accounting Technician Practice Test

(CAT) Certified Accounting Technician Practice Test

CAT Financial Planning & Forecasting 5