3. What elements of the forecast would you review if the company was not operating at full capacity and you want to ensure that its ratios did not change in 2018? This process is considered a post-mortem review to improve the forecast process for future years. (5 marks)

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1. Question - A company is looking back at its forecast process for 2018 FILL IN THE BLANKS FACTS Forecast 2018 850,000 Financial Statements: Sales Cost of Goods Sold Other Fixed Costs Taxes Net Earnings New Co. Actual 2017 500,000 200,000 150,000 50,000 100,000 Use % of Sales Method % 100.0% -40.0% -30.0% -10.0% 20.0% Cash Accounts Receivable Inventory Fixed Assets Total 25,000 50,000 25,000 250,000 350,000 5.0% 10.0% 5.0% 50.0% Not Applicable Accounts Payable 50,000 10.0% Long-term Debt 100,000 Common Stock 100,000 Same 100,000 Retained Earnings 100,000 Total 350,000 Not Applicable Debt to Assets Target 28.6% Debt to Equity Target 50.0% Current Ratio (excludes cash) Target 1.50 ROE 50.0% Note: 8 marks 1. No dividends are paid 2 marks State two issues about the impact of sales growth to the company in the forecast. 1 2 1. Question - A company is looking back at its forecast process for 2018 FILL IN THE BLANKS FACTS Forecast 2018 850,000 Financial Statements: Sales Cost of Goods Sold Other Fixed Costs Taxes Net Earnings New Co. Actual 2017 500,000 200,000 150,000 50,000 100,000 Use % of Sales Method % 100.0% -40.0% -30.0% -10.0% 20.0% Cash Accounts Receivable Inventory Fixed Assets Total 25,000 50,000 25,000 250,000 350,000 5.0% 10.0% 5.0% 50.0% Not Applicable Accounts Payable 50,000 10.0% Long-term Debt 100,000 Common Stock 100,000 Same 100,000 Retained Earnings 100,000 Total 350,000 Not Applicable Debt to Assets Target 28.6% Debt to Equity Target 50.0% Current Ratio (excludes cash) Target 1.50 ROE 50.0% Note: 8 marks 1. No dividends are paid 2 marks State two issues about the impact of sales growth to the company in the forecast. 1 2