Multiple choice

1. Which of the following statements about the percent-of-sales method of financial forecasting is true?

It is the least commonly used method of financial forecasting. 

B. It projects all liabilities as a fixed percentage of sales. 

C. It is a much more precise method of financial forecasting than a cash budget would be. 

D. It involves estimating the level of an expense, asset, or liability for a future period as a percent of the forecast for sales revenues. 

2. Which of the following is considered to be a spontaneous source of financing?

A. Inventory 

B. Operating leases 

C. Accounts receivable 

D. Accounts payable 

3. A toy manufacturer following the hedging principle will generally finance seasonal inventory build-up prior to the Christmas season with

A. trade credit.

B. common stock.

C. selling equipment.

D. preferred stock. 

4. For the NPV criteria, a project is acceptable if the NPV is __________, while for the profitability index, a project is acceptable if the profitability index is 

A. greater than one, greater than zero 

B. less than zero, greater than the required return

C. greater than zero, greater than one 

D. greater than zero, less than one