Question
ACT5725 Consider the following actual FY2017 data and a forecast of FY2018 selected balance sheet and income statement numbers. $ millions FY2017 Actual FY2018 Est.
ACT5725
Consider the following actual FY2017 data and a forecast of FY2018 selected balance sheet and income statement numbers.
$ millions | FY2017 Actual | FY2018 Est. |
---|---|---|
Net sales | $29,009 | $32,102 |
Total assets | 14,592 | 16,051 |
Total liabilities | 8,755 | 9,923 |
Total equity | 5,837 | 6,128 |
Cash | 2,918 | 4,378 |
Marketable securities | 730 | 730 |
Total liabilities (inc. long-term debt) | 8,755 | 9,923 |
Treasury stock | (2,189) | (2,627) |
a. Calculate the company's normal cash level as a percentage of sales. Round answer to one decimal place (ex: 0.2345 = 23.5%) Answer
% b. Determine the amount of adjustment needed to return cash to a normal level. Is an adjustment warranted? If an adjustment is not warranted, enter zero as the amount needed to return cash to a normal level. If the adjustment is a decrease, use a negative sign with your answer. Round answer to the nearest whole number, if applicable. $Answer For parts d through h, complete the table below.
d. Adjust marketable securities so the forecasted cash balance is at its normal level. What affect does this have on the forecasted liabilities-to-equity ratio? e. Adjust long-term debt so the forecasted cash balance is at its normal level. What effect does this have on the forecasted liabilities-to-equity ratio? f. Adjust treasury stock so the forecasted cash balance is at its normal level. What effect does this have on the forecasted liabilities-to-equity ratio? g. Adjust both long-term debt and marketable securities so as to adjust the forecasted cash balance. In so doing, make sure we preserve the companys liabilities-to-equity ratio. (Hint: Use Goal Seek under the What-If Analysis in Excel to determine the proportion of long-term debt versus treasury stock needed to ensure the forecasted liabilities-to-equity ratio remains at its historical level.) h. Adjust both long-term debt and treasury stock so as to adjust the forecasted cash balance. In so doing, make sure we preserve the companys liabilities-to-equity ratio. (Hint: Use Goal Seek under the What-If Analysis in Excel to determine the proportion of long-term debt versus treasury stock needed to ensure the forecasted liabilities-to-equity ratio remains at its historical level.)
Do not use any negative signs with your answers.
Round liabilities to equity ratios to two decimal places.
Hints
Part g. - Marketable securities is adjusted by $432. Debt is adjusted by $704.
Part h. - Debt is adjusted by $966. Treasury stock is adjusted by $170.
d. | g. Debt and | h. Debt and | |||
---|---|---|---|---|---|
Marketable | f. Treasury | Marketable | Treasury | ||
$ millions | Securities | e. Debt | Stock | securities | stock |
Total assets | $Answer | $Answer | $Answer | $Answer | $Answer |
Total liabilities | Answer | Answer | Answer | Answer | Answer |
Total equity | Answer | Answer | Answer | Answer | Answer |
Cash | Answer | Answer | Answer | Answer | Answer |
Marketable securities | Answer | Answer | Answer | Answer | Answer |
Total liabilities (inc. LT debt) | Answer | Answer | Answer | Answer | Answer |
Treasury stock | Answer | Answer | Answer | Answer | Answer |
Liabilities to equity ratio | Answer | Answer | Answer | Answer | Answer |
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