Exam 15: Financial Planning and Forecasting

Goldilochs Inc. reported sales of $5 million and net income of $1 million. The firm has $10.5 million in total assets. The firm's chief financial officer is projecting a 20 percent increase in sales. If the firm's sales do increase by 20 percent, it is expected that spontaneous liabilities will increase by $1 million. The firm currently pays out 30 percent of its net income to shareholders. Assuming that all assets are expected to grow with sales, how much in additional funds will Goldilochs need from external sources to fund the expected growth?

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach? Year 2013 2014 2015 2016 2017 Sales \ 1,200,000 \ 1,750,000 \ 1,100,000 \ 2,000,000 1,500,000

If a firm has excess capacity when calculating AFN (Additional Funds Needed), A* will most likely equal which of the following?

Suppose that Wind Em Corp. currently has the balance sheet shown as follows, and that sales for the year just ended were $15 million. The firm also has a profit margin of 23 percent, a retention ratio of 40 percent, and expects sales of $20 million next year. If all assets and current liabilities are expected to grow with sales, what is the necessary increase in assets? Assets Iiabilities ard Equity Current Assets \ 2,000,000 Current Liabilities \ 2,500,000 Fixed Assets 8,000,000 Long-tern Debt 1,5000,000 Equity 6,000,000 Total Assets \ 10,000,000 Total Liabilities and Equity \ 10,000,000

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach? Year 2013 2014 2015 2016 2017 Sales \ 10,000,000 \ 10,500,000 \ 10,700,000 \ 11,000,000 \ 12,000,000

Which of the following will increase a firm's need for additional funds?

First order effects are defined as which of the following?

Suppose that Road Industries currently has the balance sheet shown as follows, and that sales for the year just ended were $80 million. The firm also has a profit margin of 5 percent, a retention ratio of 10 percent, and expects sales of $82 million next year. If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth? Assets Iiabilities ardd Equity Current Assets \ 21,500,000 Current Liabilities \ 10,000,000 Fixed Assets 53,000,000 Long-term Debt 34,000,000 Equity 30,500,000 total assest \7 4,500,000 total liabilities and equity \7 4,500,000

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using regression to estimate a trend? Year 2013 2014 2015 2016 2017 Sales \ 2,000,000 \ 1,800,000 \ 2,200,000 \ 2,400,000 \ 2,300,000

Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has $12 million in total assets and $500,000 in current liabilities. The firm currently pays out 25 percent of its net income to shareholders. Assume that all assets and current liabilities are expected to grow with sales. If Goldilochs does not want to rely on any external sources of funds, what is the most sales can grow (in dollars)?

Suppose that Gyp Sum Industries currently has the balance sheet shown as follows, and that sales for the year just ended were $20 million. The firm also has a profit margin of 22 percent, a retention ratio of 42 percent, and expects sales of $30 million next year. If all assets and current liabilities are expected to grow with sales, how much additional funds will Gyp Sum need from external sources to fund the expected growth? Assets Liabilities ard Equity Current Assets 2,000,000 Current Liabilities \ 1,500,000 Fixed Assets 14,000,000 Long-tem Debt 1,500,000 Equity 13,000,000 Total Assets \ 16,000,000 Total Liabilities and Equity \ 16,000,000