Forecasting Financial Needs in Action

Forecasting is an important part of any firm's financial plan. Financial managers create forecasts by preparing budgets, and these budgets are then analyzed in order to determine if$/$when a firm will need to secure internal and external financing.

Instructions: Match each example with the corresponding step in the financial planning process.

How to Obtain Consolidate Planned Expenditures Reconcile and Moderate Cash

Match each of the options above to the items below.

Forecast the firm$$s short$-$term and long$-$term financial needs.

No answer

Develop a financial plan.

No answer

Create the capital and cash budget.

No answer

Create the operating$/$master budget.

No answer

Establish financial controls to see whether the firm is achieving its goals.

Financing

Many companies secure financing from various sources with various payback periods. Not all funding sources are the same, and in fact, some can come with a pretty high cost to the firm. These costs could include high interest rates, long payback periods, and increased ownership in the firm which could result in lost control.

Select the appropriate financing term for each funding option.

$1.$ Bank loan of $10$ months

multiple choice $1$

short$-$term financing

long$-$term financing

$2.$ Bank loan of $20$ months

multiple choice $2$

short$-$term financing

long$-$term financing

$3.$ Bond

multiple choice $3$

short$-$term financing

long$-$term financing

$4.$ Commercial paper

multiple choice $4$

short$-$term financing

long$-$term financing

$5.$ Line of credit

multiple choice $5$

short$-$term financing

long$-$term financing

$6.$ Stock

multiple choice $6$

short$-$term financing

long$-$term financing

$7.$ Trade credit

multiple choice $7$

short$-$term financing

long$-$term financing