Question

Can you make sure #2 is right too? thanks

6. Projected financial statements and basic analysis Aa Aa E You are the most creative analyst for Black Sheep Broadcasting Company, and your admirers want to see you work your analytical magic once more. 2016 Actual Results 2017 Initial Forecast Number of common shares (millions) Net sales Earnings before taxes Earnings before interest and taxes Fixed operating costs except depreciation Interest Common dividends Gross profit Net income Depreciation Cost of goods sold Taxes Earnings per share Dividends per share Addition to retained earnings 20.0 $20,000 $2,200 $2,600 (1,000) (400) (713) $4,000 $1,320 (400) (16,000) (880) $66 $36 $607 20.0 $24,000 $2,720 $3,120 (1,200) (400) (713) $4,800 1,632 (480) (19,200) (1,088) $82 $36 $919 Which of the following are assumptions made by the initial income statement forecast? Check all that apply. O The cost of sales percentage for Black Sheep Broadcasting Company will decrease due to economies of scale. The forecasted increase in net sales is 20%. Spontaneously generated funds will sufficiently cover any financing needs. Black Sheep Broadcasting Company will be issuing additional debt in the coming year. No excess capacity currently exists. Black Sheep Broadcasting Company will be issuing additional shares of common stock in the coming year.

Answer 1

Increase charges against net income, reducing the amount of available internally generated funds.
Because there is no growth is expected in the coming years.