16-16 FINANCIAL FORECASTING Sue Wilson, the new financial manager of New World Chemicals (NWC), a California producer of specialized chemicals for use in fruit orchards, must prepare a formal financial forecast for 2012. NWC s 2011 sales were $2 billion, and the marketing department is forecasting a 25% increase for 2012. Wilson thinks the company was operating at full capacity in 2011, but she is not sure. The first step in her forecast was to assume that key ratios would remain unchanged and that it would be business as usual at NWC. The 2011financial statements, the 2012 initial forecast, and a ratio analysis for 2011 and the 2012 initial forecast are given in Table IC 16.1.

Question C Calculate NWCs forecasted ratios based on its final forecast and compare them with the companys 2011historical ratios, the 2012 initial forecast ratios, and the industry averages. How does NWC compare with the average firm in its industry, and is the companys financial position expected to improve during the coming year? Explain.