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, Healthy Grains Inc., was established in 2 0 0 8 and reached sales of over $ 4 million by 2 0 1 5 .
Healthy Grains Inc., was established in and reached sales of over $ million by by ear for too long. Geoff immediately called their treasurer, Matt Evans. Matt I need to know how much additional funding we are going to need for the next year, said Geoff. The growth rate of revenues should be between and I would really appreciate if you can have the forecast on my desk by early next week. Matt knew that his fishing plans for the weekend had better be put asideit was going to be a long and busy weekend for him. He immediately asked the accounting department to give him the last three years financial statements see Tables and and got right to work.
Income Statement
For the Year Ended Dec. st
Sales
Cost of Goods Sold
Gross Profit
Selling and G&A Expenses
Fixed Expenses
Depreciation Expenses
Earnings Before Interest and Taxes EBIT
Interest Expense
Earning before Taxes EBT
Taxes
Net Income
Retained Earnings
Questions: Calculate revenue in table
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? 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? Healthy Grains Inc. has a flexible credit line with the Uptown Bank. If Geoff decides to keep the debtequity ratio 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. Initially, Matt assumes that the firm is operating at full capacity. How much additional financing will it need to support revenue growth rates ranging from to per year? After conducting an interview with the production manager, Matt realizes that Healthy Grains Inc. is operating its plant at capacity. How much additional financing will it need to support growth rates ranging from to What actions can Geoff take in order to alleviate some of the need for external financing? Analyze the feasibility and implications of each suggested action. How critical is the financial condition of Healthy Grains Inc.? Is Dawn justified in being concerned about the need for financial planning? Explain why. Given that Geoff prefers not to deviate from the firms debtequity ratio, what will the firms proforma income statement and balance sheet look like under the scenario of growth in revenue for ignoring feedback effects
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