Question

6. Projected financial statements and basic analysis You are the most creative analyst for Black Sheep Broadcasting Company, and your admirers want to see you work your analytical magic once more. Net sales Cost of goods sold Gross profit Fixed operating costs except depreciation Depreciation 2016 Actual Results $20,000 (16,000) $4,000 (1,000) (400) $2,600 (400) $2,200 (880) 2017 Initial Forecast $24,000 (19,200) $4,800 (1,200) (480) $3,120 (400) Earnings before interest and taxes Interest Earnings before taxes $2,720 Taxes (1,088) Net income $1,320 1,632 Common dividends (712.8) (712.8) $919.2 Addition to retained earnings $607.2 Earnings per share $66 $81.6 $35.64 $35.64 Dividends per share Number of common shares (millions) 20.0 20.0

Answer 1

Which of the following are assumptions made by the initial income statement forecast?
Answers:
The forecasted increase in net sales is 20%
Spontaneously generated funds will sufficiently cover any financing needs
Explanation
Change in sales =((24000-20000)/20000) * 100 = 20%
Spontaneously generated funds will sufficiently cover any financing needs can be said as company would not be raising debt or equity which we can say as interest expense & shares are unchanged.
If Black sheep broadcasting company had neither a sufficient amount of excess capacity to handle forecasted increase in operations nor the level of retained earnings required to increase asset levels up to the necessary level for production , this difference would be referred to as capital expenditure and could be acquired in which of the following forms ?
				Answer :
				I,II and III