You are the most creative analyst for Saltwater Logistics Corp., and your admirers want to see you work your analytical magic once more.

	2016 Actual Results	2017 Initial Forecast
Net sales	$19,000	$28,500
Cost of goods sold	(15,200)	(22,800)
Gross profit	$3,800	$5,700
Fixed operating costs except depreciation	(950)	(1,425)
Depreciation	(380)	(570)
Earnings before interest and taxes	$2,470	$3,705
Interest	(380)	(380)
Earnings before taxes	$2,090	$3,325
Taxes	(836)	(1,330)
Net income	$1,254	1,995
Common dividends	(677.16)	(677.16)
Addition to retained earnings	$576.84	$1,317.84
Earnings per share	$62.7	$99.75
Dividends per share	$33.858	$33.858
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 Saltwater Logistics Corp.

The forecasted increase in net sales is 50%.

The assigned depreciation method has changed.

The facility is not currently operating at full capacity.

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

IV

II and IV

III

II

III and IV

I

I and IV

I and II

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

spontaneously increase liabilities associated with the cost of goods sold.

reduce the level of cash on hand.

increase charges against net income, reducing the amount of available internally generated funds.

increase the length of the operating cycle.