Suppose forecasted total assets are less than forecasted total liabilities and equity. Which of the following is true?

• A. The company needs to raise additional financing.
• B. The company expects to have more financing that it will need.
• C. You made a mistake in the forecast, since Assets = Liabilities + Equity.
• D. The company should increase its dividend payout ratio.

2.

Given the following information:

Case	1	2
Cost of Goods Sold	60% of sales	70% of sales
Selling, General, and Administrative Expense	20% of sales	12% of sales
Net Profit	5% of sales	7% of sales
Dividends	40% of net profit	20% of net profit
Cash	2% of sales	3% of sales
Accounts Receivable	8% of sales	6% of sales
Inventory	15% of C.O.G.S.	10% of C.O.G.S.
Accounts Payable	7% of sales	10% of sales
Accrued Expenses	4% of sales	6% of sales

In which case(s) would an increase in the sales growth rate increase external financing required?

• A.

  1 only

• B.

  2 only

• C.

  1 and 2

• D.

  neither 1 nor 2