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Which of the following are assumptions made by the initial income statement forecast? Check all that apply. Additional external financing will be required by Avatar

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Which of the following are assumptions made by the initial income statement forecast? Check all that apply. Additional external financing will be required by Avatar Animators Inc. The forecasted increase in net sales is 30%. The facility is not currently operating at full capacity. The assigned depreciation method has changed. No additional external financing will be required. The facility is currently operating at full capacity. Which of the following could be a direct cause of financing feedback? I. Issuing additional common stock II. Purchasing additional buildings with internally generated funds III. An unexpected increase in sales IV. Borrowing from the bank O III O II and IV O II O I and II O I and IV O III and IV O IV What is one of the potential consequences of financing feedback that might cause the actual financing needs to be higher than initially thought? Financing feedback might O spontaneously increase liabilities associated with the cost of goods sold. increase the length of the operating cycle. O increase charges against net income, reducing the amount of available internally generated funds. O reduce the level of cash on hand. You are the most creative analyst for Avatar Animators Inc., and your admirers want to see you work your analytical magic once more. 2016 Actual Results 2017 Initial Forecast Net sales $17,000 $22,100 Cost of goods sold (13,600) $3,400 Gross profit Fixed operating costs except depreciation (850) (17,680) $4,420 (1,105) (442) $2,873 Depreciation Earnings before interest and taxes (340) $2,210 Interest (340) (340) Earnings before taxes $1,870 $2,533 Taxes (748) (1,013.2) Net income $1,122 1,519.8 Common dividends (605.88) (605.88) Addition to retained earnings $516.12 $913.92 Earnings per share $56.1 $75.99 $30.294 $30.294 Dividends per share Number of common shares (millions) 20.0 20.0 Which of the following are assumptions made by the initial income statement forecast? Check all that apply. Additional external financing will be required by Avatar Animators Inc. The forecasted increase in net sales is 30%. The facility is not currently operating at full capacity. The assigned depreciation method has changed. No additional external financing will be required. The facility is currently operating at full capacity. Which of the following could be a direct cause of financing feedback? I. Issuing additional common stock II. Purchasing additional buildings with internally generated funds III. An unexpected increase in sales IV. Borrowing from the bank O III O II and IV O II O I and II O I and IV O III and IV O IV What is one of the potential consequences of financing feedback that might cause the actual financing needs to be higher than initially thought? Financing feedback might O spontaneously increase liabilities associated with the cost of goods sold. increase the length of the operating cycle. O increase charges against net income, reducing the amount of available internally generated funds. O reduce the level of cash on hand. You are the most creative analyst for Avatar Animators Inc., and your admirers want to see you work your analytical magic once more. 2016 Actual Results 2017 Initial Forecast Net sales $17,000 $22,100 Cost of goods sold (13,600) $3,400 Gross profit Fixed operating costs except depreciation (850) (17,680) $4,420 (1,105) (442) $2,873 Depreciation Earnings before interest and taxes (340) $2,210 Interest (340) (340) Earnings before taxes $1,870 $2,533 Taxes (748) (1,013.2) Net income $1,122 1,519.8 Common dividends (605.88) (605.88) Addition to retained earnings $516.12 $913.92 Earnings per share $56.1 $75.99 $30.294 $30.294 Dividends per share Number of common shares (millions) 20.0 20.0

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