ACTUAL QUESTIONS AND CORRECT
ANSWERS
Profit forecasting - Correct answers✔the projection of future earnings after all the projected costs
are subtracted from the projected sales
Balance Sheet Forecasting - Correct answers✔Using sales growth and the profit forecast to
construct a pro forma balance sheet to understand the future implications of the sources and uses
of finances
What is primary objective of the forecasting process? - Correct answers✔Estimating the
discretionary financing needed (DFN)
Discretionary Financing Needed (DFN) - Correct answers✔The additional financing needed
given a firm's expectations for future growth
What role does financial forecasting play in the future success and growth of a firm? - Correct
answers✔Financial forecasting supplements historical data with proposed investments or
changes to allow for more accurate foresight
What is the goal of financial forecasting? - Correct answers✔To understand the implications of
today's decisions on tomorrow's performance
Spontaneous accounts - Correct answers✔Accounts that vary proportionally with sales