Financial Planning & Forecasting Flashcards
7 cards from real CAT practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Planning & Forecasting flashcards as text
In exponential smoothing, what does a higher smoothing constant (α closer to 1) indicate?
Answer: More weight is given to the most recent data
A smoothing constant close to 1 places almost all weight on the most recent observation.
Which budget is typically prepared first when building a master budget?
Answer: Sales budget
The sales budget is prepared first because all other budgets (production, purchases, cash) depend on forecast sales volume.
A company has a net profit margin of 8% and forecasts sales of $2,500,000. What is the projected net profit?
Answer: $200,000
$2,500,000 × 0.08 = $200,000.
Which of the following is an example of a qualitative forecasting technique?
Answer: Delphi method
The Delphi method gathers expert opinions iteratively, making it a qualitative rather than quantitative technique.
A favorable cost variance means:
Answer: Actual costs were lower than budgeted costs
A favorable variance on costs means the company spent less than planned, which is positive for profitability.
A zero-based budget (ZBB) requires managers to:
Answer: Justify every expense from scratch regardless of prior year spending
ZBB starts from a 'zero base' and requires every cost to be justified anew for each budget period.
Which financial statement is most directly produced by a cash flow forecast?
Answer: Projected cash flow statement
A cash flow forecast directly estimates future cash inflows and outflows, producing a projected cash flow statement.