İŞLETME FİNANSI I - Deneme Sınavı - 6

The sales should contain the following information derived from the market research and sales expectations:

• The alternatives of sale on account credit terms including term and interest and the collection policy ,

• The specific market for each product and service,

• The after sales service and the service providers’ responsibility,

• In the case of new market penetration and product development, the relevant strategies containing the targeted sales volume and its’ effects on the prices,

• The expenditures required to apply the sales budget and funding sources,

• The inflation expectations and pricing policy

The flexibility of financial planning by the use of the capabilities of information technology enables to realize scenario analysis to evaluate the effects of the possible financial and environmental changes on corporate activities in the future. Therefore, the correct option is C.

The financial plans should be realistic but also flexible in order to give future direction to the corporate and serve as benchmark. However, in order to prepare financial plans, some assumptions should be made in relation with the variables including, but not limited to inflation, economic growth, sales growth, foreign exchange rates etc. It is a fact that during the planning horizon those assumptions may fail. The planning process should be designed to be revised periodically to reflect the effects of those changes to the financial plans. The assumptions used may be:

• The effectiveness and length of cash conversion cycle
• The sales and collection policies,
• Capital budgeting techniques,
• The cost of capital and its revisions depending on the financial circumstances,
• Target capital structure,
• The cash dividend policy,
• The tendency to finance the working capital needs by short-term borrowings

Therefore, the correct option is D.

The operational peculiarities of a company and the cost accounting structure determine the coverage and reliability of a financial planning system. The required data mainly includes Breakeven Analysis, Ratio Analysis and the Investment Projects Evaluations. Therefore, the correct option is B

The first dimension of financial planning is the time horizon. There exist two time horizons. Shortterm is specified as maximum 12 months and the long-term which is more critical in the context of planning is said to be 5 years on average. Therefore, the correct option is A.

Long-term (Strategic) Financial Plans: These plans contain the envisaged long term financial activities and they figure out the effects of these activities on the financial position of the company. Although the time frame covered is 2-5 years, 5 year strategic plans which are revised as the new data arrives are used generally. Typically the companies that have higher operational risk and short production cycles prefer shorter term planning horizons. Longer term plans are generally used by the purposes of Research and Development, marketing and new product development, fixed investments and basic financing. These plans are supported by annual budgets and profit plans. Therefore, the correct option is C.

Short-term (Operational) Financial Plans: They consist of the envisaged financial activities and the projected effects of these activities on the financial position of the company. Short term financial plans cover generally 1-2 years and uses the sales forecasts, operational and financial data as inputs. The basic outputs, the operational budgets for divisions, cash budget and proforma financial reports. Therefore, the correct option is C.

There exist three special purpose methods to analyze the determinants of sales to make more realistic sales forecasts. The first one is industry analysis in which the individual company sales forecast is based on total industry sales. In the product analysis method, the focus is on individual product demand. It is also possible for some special sectors such as component manufacturing to use the forecast of the clients’ demand forecasts and this method is named as latest use method. Therefore, the correct option is C.

The production budgets should be prepared in terms of volume of production as paralel to sales budget and in details of product types. It should address the following aspects of production:

• The term of production budget,
• The volume of production to substantiate the sales budget, as well as the required level of inventory,
• The timing of production of each product type,
• The location of production,
• The mandatory activities within the production process,
• The tools to measure the productivity of the production process,
• The plans for labor, machinery and equipments and service requirements,
• The cost figures to determine the cost per unit

Therefore, the correct option is E.

The cash budgets ensure the availability of cash in the required time and in the required amount to with the most favorable funding costs. Additionally, it helps to utilize the cash in the most effective manner. In order to serve for those purposes, the cash budgets should be prepared in short periods, even daily when the cash management is critical. The basic aims to prepare the cash budgets are: 

• To make available the required amount of cash for the realization of planned activities,
• To determine the cash shortfall and/or excess,
• To coordinate the cash management for working capital, sales, liabilities and procurements,
• To define the funding sources when necessary,
• To plan an effective collection policy,
• To stipulate the availability of cash for investments,
• To define the minimum acceptable cash amount,
• To enable the control of cash inflows and outflows.

Therefore, the correct option is A.

In order to prepare the proforma financial reports, the existing financial reports are used as starting point. The following forecasts and estimations should be made in order to prepare the proforma financial reports:

• Sales, direct materials, direct labor and manufacturing overhead budgets,
• The forecasted sales, management expenses budget,
• Existing funding structure,
• The ownership structure,
• The volume and amount of direct materials,
• The volume and amount of finished products,
• The existing amount of fixed assets,
• The receivables and payables,
• The sales and proceeds,
• Non operating and extraordinary expenses,
• Operating expenses,
• Net profit.

Therefore, the correct option is E.

Divisional proforma and realized budgets and divisional financial reports are required for the financial planning process. Cash flow estimations and funding requirements are amongst the outputs of the financial planning process.

The first step of the short-term financial planning is sales forecast which is used to develop production plans.

The direct labor budget is used to determine the required labor hours in order to produce the volume of products as stipulated in the production budget. The responsibility to prepare the direct labor budget belongs to production managers
together with cost accounting, human resources and budget control divisions.

Manufacturing overhead consist of any expenses directly related with the production except direct materials and direct labor. Structurally manufacturing overhead may be in the form of fixed or variable costs.

Preparation of a proforma balance sheet involves four basic steps:

An accepted router to establish a financial control infrastructure within a company involves the following steps:

The flexibility of financial planning by the use of the capabilities of information technology enables to realize scenario analysis to evaluate the effects of the possible financial and environmental changes on corporate activities in the future.

There are two main methods for preparation of cash budgets:

The other methods mentioned in other options are for sales forecasting

Percentage of Sales Method: Firstly, the accounts mostly affected by the changes in the sales volume are determined. Amongst these accounts are inventories, cash on hand and banks, as well as trade receivables. Typically equity and affiliate accounts are not directly affected from the changes in sales volume. The method can be applied in the means of daily sales or sales percentage approach. Sales Percentage Method is the mostly preferred method.