Answer To Chapter Question

a)Describe three ways that pro forma statements atomic number 18 utilize in financial course of studyning. The company use financial think for the following purpose 1.Forecast the amount of additional fund exacted 2. readiness 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 soaked b) rationalize the steps in financial forecasting. The steps are as follow 1.Forecast sales 2. declare oneself the pluss compulsory to shop sales 3.Project intern all in ally 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 in effect(p) capacity in 2004 with respect to all assets, (2) that all assets moldiness grow similarityally with sales, (3) that accounts payable and accruals result also grow in proportion to sales, and (4) that the 2004 profit tolerance and dividend payout will be maintained. below these conditions, what will the companys financial requirements be for the coming year? rehearse the AFN compare to answer this question. AFN = (A*/S0) ?S - (L*/S0) ?S M (S1)(RR) gross revenue accession = 25% 2004 Profit Margin = 2.

70% Payout proportionality = 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) Sale s increase, (2) the dividend payout ratio in! creases, (3) the profit margin increases, (4) the capital loudness ratio increases, and (5) SEC begins paying its suppliers sooner. (Consider all(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, so more earnings would be retained, and this would reduce the need for impertinent 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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