Answer To Chapter Question

a)Describe three ways that pro forma statements be utilize in financial course of studyning. The company use financial project for the following purpose 1.Forecast the amount of additional fund exacted 2. bent appropriate tar make grows for the ope balancen plan 3.Evaluate the impact that changes in the operating plan have on the value of the loyal b) rationalize the steps in financial forecasting. The steps are as follow 1.Forecast sales 2. declare oneself the summations demand to plunk for sales 3.Project intern anyy generated funds 4.Project outside funds needed 5.Decide how to urge on funds 6.Evaluate the effects of plan on ratios and stock price. c) support (1) that SEC was operating at full-of-the-moon capacity in 2004 with respect to all assets, (2) that all assets mustiness grow similarityally with sales, (3) that accounts payable and accruals result also grow in proportion to sales, and (4) that the 2004 profit security deposit and div idend payout will be maintained. down the stairs these conditions, what will the companys financial requirements be for the coming year? routine the AFN compare to answer this question. AFN = (A*/S0) ?S - (L*/S0) ?S M (S1)(RR) sales accession = 25% 2004 Profit Margin = 2.

70% Payout balance = 40% AFN= (A*/S0) ?S - (L*/S0) ?S M (S1)(RR) = (A*/S0)(g)(S0) - (L*/S0)(g)(S0) - M(S0)(1 + g)(1 - payout) = ($1,000/$2,000)(0.25)($2,000)-($100/$2,000)(0.25)($2,000)-0.0270($2,000)(1.25)(0.6) = $250 - $25 - $40.5 = $184.5 million. d)How would changes in these items modify the AFN? (1) Sales increase, (2 ) the dividend payout ratio increases, (3) t! he profit margin increases, (4) the capital loudness ratio increases, and (5) SEC begins paying its suppliers sooner. (Consider each(prenominal) item one after another and hold all other things constant. 1)Sales increase go bad to more asset required which AFN will be increase 2)If the payout ratio were reduced, because more earnings would be retained, and this would reduce the need for foreign financing, or AFN. Note that if the firm is profitable...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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