4. Projected financial statements and basic analysis Aa Aa You are the most creative analyst for Avatar Animators Inc., and your admirers want to see you work your analytical magic once more. Number of common shares (millions) Cost of goods sold Earnings per share Fixed operating costs except depreciation Depreciation Interest Taxes Gross profit Earnings before interest and taxes Earnings before taxes Common dividends Dividends per share Addition to retained earnings Net sales Net income 2016 Actual Results 20.0 (12,000) $50 (750) (300) (300) (660) $3,000 $1,950 $1,650 (535) $27 $455 $15,000 $990 2017 Initial Forecast 20.0 (15,600) $67 (975) (390) (300) (894) $3,900 $2,535 $2,235 (535) $27 $806 $19,500 1,341 O which of the following are assumptions made by the initial income statement forecast? Check all that apply. The assigned depreciation method has changed. The forecasted increase in net sales is 30%. Additional external financing will be required by Avatar Animators Inc. The facility is currently operating at full capacity. No additional external financing will be required. The facility is not currently operating at full capacity. If Avatar Animators Inc. had neither a sufficient amount of excess capacity to handle forecasted increases in operations nor the level of retained earnings required to increase asset levels up to the necessary level for production, this difference would be referred to as and could be acquired in which of the following forms? I. Issuing additional common stock II. Borrowing from a bank using notes payable III. Issuing long-term bonds I and II Just II Just III I only I, II, and III II and III 4. Projected financial statements and basic analysis Aa Aa You are the most creative analyst for Avatar Animators Inc., and your admirers want to see you work your analytical magic once more. Number of common shares (millions) Cost of goods sold Earnings per share Fixed operating costs except depreciation Depreciation Interest Taxes Gross profit Earnings before interest and taxes Earnings before taxes Common dividends Dividends per share Addition to retained earnings Net sales Net income 2016 Actual Results 20.0 (12,000) $50 (750) (300) (300) (660) $3,000 $1,950 $1,650 (535) $27 $455 $15,000 $990 2017 Initial Forecast 20.0 (15,600) $67 (975) (390) (300) (894) $3,900 $2,535 $2,235 (535) $27 $806 $19,500 1,341 O which of the following are assumptions made by the initial income statement forecast? Check all that apply. The assigned depreciation method has changed. The forecasted increase in net sales is 30%. Additional external financing will be required by Avatar Animators Inc. The facility is currently operating at full capacity. No additional external financing will be required. The facility is not currently operating at full capacity. If Avatar Animators Inc. had neither a sufficient amount of excess capacity to handle forecasted increases in operations nor the level of retained earnings required to increase asset levels up to the necessary level for production, this difference would be referred to as and could be acquired in which of the following forms? I. Issuing additional common stock II. Borrowing from a bank using notes payable III. Issuing long-term bonds I and II Just II Just III I only I, II, and III II and
