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1. In financial statements, the number of units shown in the cost of goods sold as compared to the number of the units actually produced:

a: is higher
b: is lower
c: is the same
d: can be either higher or lower

2. The pro forma income statement is important to the overall process of constructing pro forma statements because it allows us to determine a value for:

a: change in retained earnings
b: gross profit
c: interest expense
d: prepaid expense

3. The need for an increase or decrease in short-term borrowing can be predicted by:

a: ratio analysis
b: trend analysis
c: cash budget
d: an income statement

4. In developing data for accounts receivable for the pro forma balance sheet, the analyst is most likely to turn to the:

a: pro forma income sheet
b: cash budget
c: prior balance sheet
d: statement of retained earnings

5. In a cash budget, the cumulative cash balance is equal to:

a: net cash flow minus the beginning cash balance
b: net cash flow plus the beginning cash balance
c: cumulative loan balance minus the ending cash balance
d: cumulative loan balance plus the ending cash balance

6. In the percent-of-sales method:

a: as the dividend payout ratio goes up, the required new funds also rise
b: as the dividend payout ratio rises, required new funds decline
c: the dividend payout ratio does not affect new funds
d: None of these

7. When using the percent-of-sales method in forecasting funds needed, which of the following is not true:

a: as the dividend payout ratio decreases, the required new funds also increases.
b: required new funds decrease as profit margins increase.
c: required new funds increase as the dividend payout decreases.
d: as the tax rate increases, the required new funds increase.