Exam 15: Financial Planning and Forecasting

Suppose that the 2013 actual and 2014 projected financial statements for Cypress Corp.are initially as shown in the following tables.In these tables,sales are projected to rise 15 percent in the coming year,and the components of the income statement and balance sheet that are expected to increase at the same 15 percent rate as sales are indicated with an italics font.Assuming that Cypress Corp.wants to cover the AFN with 35 percent equity,35 percent long-term debt,and the remainder from notes payable,what amount of additional funds will they need to raise if debt carries a 9 percent interest rate?

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?

Which of the following statements is correct?

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?

Which of the following is a set of financial statements depicting an operating division of a firm's expected financial situation in the foreseeable future under the most reasonable set of assumptions concerning relevant factors?

Suppose that Wave Industries currently has the balance sheet shown as follows,and that sales for the year just ended were $25 million.The firm also has a profit margin of 10 percent,a retention ratio of 20 percent,and expects sales of $27 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?

Goldilochs Inc.reported sales of $8 million and net income of $1.5 million.The firm has $10.5 million in total assets and $1 million in current liabilities.The firm currently pays out 75 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 a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the naїve approach?

Suppose that Wind Em Corp.currently has the balance sheet shown as follows,and that sales for the year just ended were $12 million.The firm also has a profit margin of 20 percent,a retention ratio of 30 percent,and expects sales of $22 million next year.If all assets and current liabilities are expected to grow with sales,what is the necessary increase in assets?

Which of the following is defined as assuming that future sales will be equal to the average historical value across some relevant period?

Which of the following is the amount of external financing a firm must seek in order to change the asset base as necessary to support a different level of sales?

Suppose that Runner Industries currently has the balance sheet shown as follows,and that sales for the year just ended were $5 million.The firm also has a profit margin of 10 percent,a retention ratio of 20 percent,and expects sales of $7 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?

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

Which of the following defines iterative calculation?

Which liabilities would tend to spontaneously increase with sales? Why?

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?

Suppose that PBJ Industries,Inc.currently has the balance sheet shown as follows,and that sales for the year just ended were $10 million.The firm also has a profit margin of 10 percent,a retention ratio of 25 percent,and expects sales of $12 million next year.If all 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?

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?

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 19 percent,a retention ratio of 30 percent,and expects sales of $22 million next year.If all assets and current liabilities are expected to grow with sales,what is the projected increase in retained earnings?

All of the following will tend to increase spontaneously with sales EXCEPT: