Question

Q.1) Answer True or false for each of the following statements: (5 Marks ) 1 Future Value Interest Factor Annuity (FVIFA) is the future value of $1 ordinary annuity for n period compounded at i percent 2 Given a discount rate of zero percent and n periods of time, the present-value interest factor and future-value interest factor are equal 3 The sales forecast, cash budget, and pro forma financial statements are the key outputs of the short-run (operating) financial planning 4 An ordinary annuity is an annuity in which cash flows occurs at the beginning of each period. 5 The excess cash balance is the amount available for investment by the firm if the desired minimum cash balance is less than the period's ending cash.

Answer 1

Ans 01 :

Future Value Interest Factor Annuity (FVIFA) is the Future value of $1 ordinary annuity for n period compounded at i percent.

True : FVIFA factor always measured on$1 Principle amount.

Ans 02 :

Given a discount rate of zero percent and n perod of time, the present value interest factor and futue value interest factors are equal.

True : When discount rate 0 there is no significance on time value of money. Value of each factor will be 01.

Ans 03 :

The Sales forecast, cash budget and pro farma financial statements are the key output of the short run (operating) financial planning.

True : For short term operating financial planning weneed to have sales forecast for inventory requirment, profarma b/s and cash budget for planning short term cash requirement.

Ans 04:

An ordinal annuity is annuity in which cash flow occurs at the begining ofthe month.

False : In case of Annuity Due cash flow occurs at the begining ofthe month.

Ans 05 :

The excess cash balance is the amount available for investment by the firm if the desired minimum cash balance is less than the periods ending cash.

True: Cash Available for Investment = Periods ending cash. - desired minimum cash balance