Growing pains financial forecasting healthy grains inc with matt and geoff

I only need help with parts 4-8 to this problems. Help is much appreciated.

Page of 2 0 - ZOOM + Financial Forecasting Growing Pains "We are growing too fast," said Geoff. "I know I shouldn't complain, but we better have the capacity to fill the orders or we'll be hurting ourselves." Dawn and Geofi De Telve started their oatmeal snacks company in 2008, upon the suggestion of their close friends who simply loved the way weis oatmeal tasted. Geoff, a former college gymnastics coach, insists that he never "intended to start a basiness," hut the thought of heing able to support his college team played a significant role in motivating him to go for it. After considerable help from local retailers and a sponsorship by a major bread company, their firm, Healthy Grains Inc. was established in 2008 and reached sales of over $4 million by 2015. Given the currentiend of eating healthy snacks and keeping fli, Geoff was confident that sales would Increase significantly over the next few years. The industry growth forecast had been estimated al 30% per year, and Geoff was confident that his firm would be able to at least match if not beat that rate of sales growth. "We must plan for the future," said Dawn. "I think we've been playing it by car for too long." Geoff immediately called their treasurer, Mall Evans. "Mall, I need to know how much additional funding we are going to need for the next year," said Geoll. "The growth rate of revenues should be between 25% and 40%. I would really appreciate if you can have the forecast on my desk hy early next week." Matt knew that his filing plans for the weekend had better be put aside-it was going to be a long and busy weekend for him. He immediately 18 asked the accounting department to give him the last three years' financial statements (see Tables 1 and 2) and you right to work Table 1 Healthy Grains, Income Statement For the Year Ended Dec. 31st 2015 Sales Cost of Goods Sold Gross Profit Seling and G & A Expenses Fixed Expenses Depreciation Experise Eamings Before Interest and Taxes Interest Expense 2015 4.700,000 3,877,500 822,500 275,000 90,000 25,000 432,500 66,000 2014 3.760,000 3.045,600 714,400 250,000 90,000 25,000 319,400 66,000 2013 3,000,000 2.400,000 600,000 215,000 90,000 25,000 270,000 66,000 Page 2 of 2 - ZOOM + Table 2 Healthy Grains Inc. Balance Sheet For the Year Ended Dec. 31st 2015 2015 2014 2013 Assets Cash and Cash Equivalents Accounts Receivable Inventory Total Current Assets Plant & Equipment Accumulated Depreciation Ner Plant & Equipment Total Assets 60,000 250,416 511,500 821.916 560,000 175,000 385,000 1,206,916 97.376 175.000 390.000 662.376 560.000 150.000 410.000 1,072,376 48,000 150,000 335.000 533.000 560,000 125.000 435.000 968,000 Liabilities and Owner's Equity Accounts Payable Notes Payable Other Current Liabilities Total Current Liabilities Long-Term Debt Total Liabilities Owner's Capital Retained Earnings Total Liabilities and Owner's Equity 135,000 275,000 43,952 453,952 275,000 728,952 155,560 322 404 1,206,916 151,352 275.000 50,000 476.352 250,000 726.352 155,560 190,464 1,072.376 128,000 250,000 46,000 424.000 300,000 724.000 155,560 88,440 968,000 Questions: 1. This is the first time Matt and Geoff will be conducting a financial forecast for Healthy Grains Inc. How do you think they should proceed? Which approaches or models can they use? What are the assumptions necessary for utilizing each model? 2. If Healthy Grains Inc. is operating its fixed assets at full capacity, what growth rate can it support without the need for any additional external financing? 3. Healthy Grains Inc. has a flexible credit line with the Uptown Bank. If Geoff decides to keep the debt-equity ratiu constant, up to what rate of growth in revenue can the firm support? What assumptions are necessary when calculating this rate of growth? Are these assumptions realistic in the case of Healthy Grains Inc.? Explain. 4 Initially Matt assume that thr finis erating a full capacity. How much additional financing will it need to support revenue quwth tales Page of 2 0 - ZOOM + Financial Forecasting Growing Pains "We are growing too fast," said Geoff. "I know I shouldn't complain, but we better have the capacity to fill the orders or we'll be hurting ourselves." Dawn and Geofi De Telve started their oatmeal snacks company in 2008, upon the suggestion of their close friends who simply loved the way weis oatmeal tasted. Geoff, a former college gymnastics coach, insists that he never "intended to start a basiness," hut the thought of heing able to support his college team played a significant role in motivating him to go for it. After considerable help from local retailers and a sponsorship by a major bread company, their firm, Healthy Grains Inc. was established in 2008 and reached sales of over $4 million by 2015. Given the currentiend of eating healthy snacks and keeping fli, Geoff was confident that sales would Increase significantly over the next few years. The industry growth forecast had been estimated al 30% per year, and Geoff was confident that his firm would be able to at least match if not beat that rate of sales growth. "We must plan for the future," said Dawn. "I think we've been playing it by car for too long." Geoff immediately called their treasurer, Mall Evans. "Mall, I need to know how much additional funding we are going to need for the next year," said Geoll. "The growth rate of revenues should be between 25% and 40%. I would really appreciate if you can have the forecast on my desk hy early next week." Matt knew that his filing plans for the weekend had better be put aside-it was going to be a long and busy weekend for him. He immediately 18 asked the accounting department to give him the last three years' financial statements (see Tables 1 and 2) and you right to work Table 1 Healthy Grains, Income Statement For the Year Ended Dec. 31st 2015 Sales Cost of Goods Sold Gross Profit Seling and G & A Expenses Fixed Expenses Depreciation Experise Eamings Before Interest and Taxes Interest Expense 2015 4.700,000 3,877,500 822,500 275,000 90,000 25,000 432,500 66,000 2014 3.760,000 3.045,600 714,400 250,000 90,000 25,000 319,400 66,000 2013 3,000,000 2.400,000 600,000 215,000 90,000 25,000 270,000 66,000 Page 2 of 2 - ZOOM + Table 2 Healthy Grains Inc. Balance Sheet For the Year Ended Dec. 31st 2015 2015 2014 2013 Assets Cash and Cash Equivalents Accounts Receivable Inventory Total Current Assets Plant & Equipment Accumulated Depreciation Ner Plant & Equipment Total Assets 60,000 250,416 511,500 821.916 560,000 175,000 385,000 1,206,916 97.376 175.000 390.000 662.376 560.000 150.000 410.000 1,072,376 48,000 150,000 335.000 533.000 560,000 125.000 435.000 968,000 Liabilities and Owner's Equity Accounts Payable Notes Payable Other Current Liabilities Total Current Liabilities Long-Term Debt Total Liabilities Owner's Capital Retained Earnings Total Liabilities and Owner's Equity 135,000 275,000 43,952 453,952 275,000 728,952 155,560 322 404 1,206,916 151,352 275.000 50,000 476.352 250,000 726.352 155,560 190,464 1,072.376 128,000 250,000 46,000 424.000 300,000 724.000 155,560 88,440 968,000 Questions: 1. This is the first time Matt and Geoff will be conducting a financial forecast for Healthy Grains Inc. How do you think they should proceed? Which approaches or models can they use? What are the assumptions necessary for utilizing each model? 2. If Healthy Grains Inc. is operating its fixed assets at full capacity, what growth rate can it support without the need for any additional external financing? 3. Healthy Grains Inc. has a flexible credit line with the Uptown Bank. If Geoff decides to keep the debt-equity ratiu constant, up to what rate of growth in revenue can the firm support? What assumptions are necessary when calculating this rate of growth? Are these assumptions realistic in the case of Healthy Grains Inc.? Explain. 4 Initially Matt assume that thr finis erating a full capacity. How much additional financing will it need to support revenue quwth tales Page