Traditional Budgeting Method How do rolling forecasts enhance traditionalbudgeting methods?a) Quarterly reviews are eliminatedb) Annual budgets remain unchangedc) Regular updates replace rigid annual predictionsd) Long-term plans become fixed

Rolling forecasts offer the flexibility to incorporate real-time data and develop dynamic business…

Answered: How do rolling forecasts enhance…

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter6: Managing Cash Flow

Section6.4: Projected Monthly Financial Statements

Problem 1CC

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Consider the following time series: a. Construct a time series plot. What type of pattern exists in the data? Is there an indication of a seasonal pattern? b. Use a multiple linear regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data: Qtr1 = 1 if quarter 1, 0 otherwise; Qtr2 = 1 if quarter 2, 0 otherwise; Qtr3 = 1 if quarter 3, 0 otherwise. c. Compute the quarterly forecasts for next year.
Consider the following time series data: Construct a time series plot. What type of pattern exists in the data? Use a multiple regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data: Qtr1 = 1 if quarter 1, 0 otherwise; Qtr2 = 1 if quarter 2. 0 otherwise; Qtr3 = 1 if quarter 3, 0 otherwise. Compute the quarterly forecasts for next year based on the model you developed in part (b). Use a multiple regression model to develop an equation to account for trend and seasonal effects in the data. Use the dummy variables you developed in part (b) to capture seasonal effects and create a variable t such that t = 1 for quarter 1 in year 1, t = 2 for quarter 2 in year 1, … t = 12 for quarter 4 in year 3. Compute the quarterly forecasts for next year based on the model you developed in part (d). Is the model you developed in part (b) or the model you developed in part (d) more effective? Justify your answer.
Define the terms relative-performance (relative-improvement) contract and rolling financial forecast. What role for these is envisioned by critics of the traditional budgeting process?
Regarding Budgets, which of the following statements is true? a. A budget is a business plan for the short term. O b. A periodic budget is prepared for a particular period of time. O c. Budgets are based on forecasts. However, the performance of a manager should be compared to a target that reflects the actual environment. O d. All the answers are true.
The purpose of a flexible budget is:a) To cap discretionary expenditureb) To produce a revised forecast by changing the original budget when actual costs are knownc) To control resource efficientlyd) To communicate target activity levels within the organization by setting a budget in advance of the period to which it relates
Which one of the following is the incorrect statement regarding Budgets? Select one: a. Budget is qualitative statement of policy b. All are correct statement regarding budget. C. Budget is a predetermined statement d. Budget prepared for a defined period of time
The "Cash Budget" a)is used to predict future surpluses & shortages of cash, allowing the organization to plan ahead for such occurrences b)differs from the Master Budget due to the accrual concept c)uses the Master & Capital budgets for input d)all of the listed answers are correct
The budgeting process does not involve which of the following activities? a. periodic comparison of actual results to goals b. increased marketing efforts to boost sales c. execution of plans to achieve goals d. establishment of specific goals
Ethical Considerations. Budget projections always involve a degree of judgment because managers can neverpredict the future with total accuracy. For instance, onemanager with an optimistic view and another with apessimistic view could look at the same set of facts andarrive at distinctly different conclusions about the company’s financial prospects. When budgets will influencedecisions made by investors or lenders, how should thepeople who prepare the budgets deal with the variancebetween optimistic and pessimistic viewpoints? On theone hand, being too pessimistic could result in lowerlevels of funding, which could be detrimental to employees, existing investors, existing creditors, and otherfinancial stakeholders. On the other hand, being toooptimistic could be detrimental to prospective investors or creditors. How do you find the right balance?
Consider the following time series data: Compute MSE using the most recent value as the forecast for the next period. What is the forecast for month 8? Compute MSE using the average of all the data available as the forecast for the next period. What is the forecast for month 8? Which method appears to provide the better forecast?
Which of the following is true of budgeting? a.Budgeting relies on the control cycle to design the planning cycle for future action. b.Budgeting eradicates the need for keeping a buffer against uncertainties in demand. c.Budgeting focuses only on long-term objectives as covered by the planning cycle. d.Budgeting forces management to plan for the future. e.Budgeting creates a plan of action only in terms of production units.

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How do rolling forecasts enhance traditional budgeting methods? a) Quarterly reviews are eliminated b) Annual budgets remain unchanged c) Regular updates replace rigid annual predictions d) Long-term plans become fixed