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 Results2017 Initial ForecastNet sales$17,000$25,500Cost of goods sold(13,600)(20,400)Gross profit$3,400$5,100Fixed operating costs except depreciation(850)(1,275)Depreciation(340)(510)Earnings before interest and taxes$2,210$3,315Interest(340)(340)Earnings before taxes$1,870$2,975Taxes(748)(1,190)Net income$1,1221,785Common dividends(605.88)(605.88)Addition to retained earnings$516.12$1,179.12Earnings per share$56.1$89.25Dividends per share$30.294$30.294Number of common shares (millions)20.020.0

Which of the following are assumptions made by the initial income statement forecast?Check all that apply.

The cost of sales percentage for Saltwater Logistics Corp. will decrease due to economies of scale.

The forecasted increase in net sales is 50%.

Spontaneously generated funds will sufficiently cover any financing needs.

No excess capacity currently exists.

Saltwater Logistics Corp. will be issuing additional shares of common stock in the coming year.

Saltwater Logistics Corp. will be issuing additional debt in the coming year.

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

I and II

II and IV

II

I and IV

III

I

III and 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

increase the length of the operating cycle.

spontaneously increase liabilities associated with the cost of goods sold.

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

reduce the level of cash on hand