Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider the following actual FY2019 data and a forecast of FY2020 selected balance sheet and income statement numbers. Actual Est. FY2019 FY2020 Net sales $29,009

Consider the following actual FY2019 data and a forecast of FY2020 selected balance sheet and income statement numbers.

Actual Est.

FY2019 FY2020

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

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%)

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.

c.Compute the liabilities-to-equity ratio for both years. Round answers totwo decimal places.

FY2019 Actual

FY2020 Est.

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 company's 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 company's 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.

For parts d through h, complete the table below.

  • Do not use any negative signswith your answers.
  • Round liabilities to equity ratios totwo decimal places.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Modern Advanced Accounting In Canada

Authors: Murray Hilton

6th Edition

0070001537, 978-0070001534

More Books

Students also viewed these Accounting questions

Question

Self-confidence

Answered: 1 week ago

Question

The number of people commenting on the statement

Answered: 1 week ago