6. Projected financial statements and basic analysis You are the most creative analyst for Green Rabbit Transportation Inc., and your admirers want to see you work your analytical magic once more. 2016 Actual Results 2017 Initial Forecast Net sales $18,000 $23,400 Cost of goods sold (14,400) (18,720) Gross profit $3,600 $4,680 Fixed operating costs except depreciation (900) (1,170) Depreciation (360) (468) Earnings before interest and taxes $2,340 $3,042 Interest (360) (360) Earnings before taxes $1,980 $2,682 Taxes (792) (1,072.8) Net income $1,188 1,609.2 Common dividends (641.52) (641.52) Addition to retained earnings $546,48 $967.68 Earnings per share $59.4 $80.46 Dividends per share $32.076 $32.076 Number of common shares (millions) 20.0 20.0 Which of the following are assumptions made by the initial income statement forecast? Check all that apply. The forecasted increase in net sales is 30%. The facility is not currently operating at full capacity. No additional external financing will be required. The facility is currently operating at full capacity. The assigned depreciation method has changed. Additional external financing will be required by Green Rabbit Transportation Inc. Which of the following could be a direct cause of financing feedback? 1. Issuing additional common stock II. Purchasing additional buildings with internally generated funds III. An unexpected increase in sales V. Borrowing from the bank I and II O II and IV III and IV O TV I and IV III -01 What is one of the potential consequences of financing feedback that might cause the actual financing needs to be higher than initially thought? Financing feedback might reduce the level of cash on hand. increase charges against net income, reducing the amount of available internally generated funds. increase the length of the operating cycle. O spontaneously increase liabilities associated with the cost of goods sold. 6. Projected financial statements and basic analysis You are the most creative analyst for Green Rabbit Transportation Inc., and your admirers want to see you work your analytical magic once more. 2016 Actual Results 2017 Initial Forecast Net sales $18,000 $23,400 Cost of goods sold (14,400) (18,720) Gross profit $3,600 $4,680 Fixed operating costs except depreciation (900) (1,170) Depreciation (360) (468) Earnings before interest and taxes $2,340 $3,042 Interest (360) (360) Earnings before taxes $1,980 $2,682 Taxes (792) (1,072.8) Net income $1,188 1,609.2 Common dividends (641.52) (641.52) Addition to retained earnings $546,48 $967.68 Earnings per share $59.4 $80.46 Dividends per share $32.076 $32.076 Number of common shares (millions) 20.0 20.0 Which of the following are assumptions made by the initial income statement forecast? Check all that apply. The forecasted increase in net sales is 30%. The facility is not currently operating at full capacity. No additional external financing will be required. The facility is currently operating at full capacity. The assigned depreciation method has changed. Additional external financing will be required by Green Rabbit Transportation Inc. Which of the following could be a direct cause of financing feedback? 1. Issuing additional common stock II. Purchasing additional buildings with internally generated funds III. An unexpected increase in sales V. Borrowing from the bank I and II O II and IV III and IV O TV I and IV III -01 What is one of the potential consequences of financing feedback that might cause the actual financing needs to be higher than initially thought? Financing feedback might reduce the level of cash on hand. increase charges against net income, reducing the amount of available internally generated funds. increase the length of the operating cycle. O spontaneously increase liabilities associated with the cost of goods sold
