a. Which of the following statements about risk ma...

a. Which of the following statements about risk management relating to net working capital is true？ 1) The extremely conservative approach uses long-term debt to finance only a portion of long-term assets and the permanent portion of net working capital. 2) The spontaneous current liabilities required at the seasonal high are called spontaneous permanent liabilities. 3) The aggressive approach uses long-term debt to finance the permanent portion of net working capital plus a portion of the long-term assets. 4) The moderately conservative approach uses long-term debt to finance all long-term assets and both the seasonal and permanent portions of net working capital. b. There are both limitations and benefits associated with the long-term financial planning process. Which of the following is not a limitation？ 1) The financial plan is based on a number of key variables, any one of which can prove to be inaccurate. 2) Assumptions underlying the financial plan can be obsolete by the time the plan is finalized. 3) The output of the financial planning process is a quantitative report that does not take into account qualitative factors. 4) The financial planning process is both time and resource intensive. c. The financial planning model results in a set of pro forma financial statements. Which of the following is an element required to construct these financial statements？ 1) Strategic choices by management, such as interest rates and bad debts 2) Estimates of periodic cash inflows and outflows to identify short-term borrowing and investing needs 3) External forecasts, such as capital expenditures and capital structure 4) Constraints, such as the requirement that the statement of financial position must balance each year d. Which of the following is true？ 1) Cash budgets should not be prepared with uncertain numbers. 2) Cash budgeting is a one-time process. 3) It is helpful to prepare separate cash budgets for alternative forecasts of key variables. 4) Cash budgets should not be used to evaluate the impact of different scenarios. e. Which one of the following statements correctly describes the moderately conservative strategy of financing net working capital？ 1) Finance all long-term assets and permanent net working capital with long-term debt. 2) Finance all long-term assets and all net working capital, both permanent and seasonal, with long-term debt. 3) Use short-term borrowing to finance the seasonal portion of net working capital, a portion of permanent net working capital, and a portion of long-term assets. 4) Increase accounts payable to fund long-term assets. f. Which of the following is true？ 1) The value of plant and equipment is not easily projected since plans for expansions are kept tentative until the last moment. 2) Pro forma financial statements are vital because preventative or remedial action can be taken if undesirable developments are noted. 3) Sensitivity analysis does not enable management to explore the impact of alternative assumptions in projecting financial statements. 4) Sensitivity analysis does not help to identify those factors that have the greatest impact on a firm's performance.