2. Financial Planning and Forecasting: Forecasted Financial Statements useful to forecast the firm's financial statements. The firm begins with forecasting its which then feeds into the firm's balance sheet. Management looks at operating ratios and their The impact of these changes on the firm's forecasted financial statements ultimately can be used to improve the firm's operations. Quantitative Problem: At the end of last year, Edwin Inc. reported the following income statement (in millions of dollars): Looking ahead to the following year, the company's CFO has assembled this information: - Year-end sales are expected to be 6% higher than $4.2 billion in sales generated last year. - Year-end operating costs, excluding depreciation, will equal 70% of sales. - Depreciation costs are expected to increase at the same rate as sales. - Interest costs are expected to remain unchanged. - The tax rate is expected to remain at 40%