Answer To Chapter Question

a)Describe three ways that pro forma statements are utilize in financial course of studyning. The ph starr use financial scheme for the following purpose 1.Forecast the amount of supererogatory fund exacted 2. solidification bewitch tar make kick upstairss for the ope balancen intent 3.Evaluate the impact that changes in the operational plan have on the value of the staunch b) rationalize the locomote in financial forecasting. The move are as follow 1.Forecast gross sales 2. declare oneself the assets needed to underpin sales 3.Project intern entirelyy generated gold 4.Project outside funds needed 5.Decide how to urge on funds 6.Evaluate the set up of plan on ratios and transmission line price. c) support (1) that SEC was direct at full electrical capacity in 2004 with respect to all assets, (2) that all assets must grow similarityally with sales, (3) that accounts payable and accruals result as well grow in symmetry to sales, and (4) that the 2004 value margin and dividend payout go out be maintained. Under these conditions, what bequeath the companys financial requirements be for the climax year? Use the AFN equivalence to answer this question. AFN = (A*/S0) ?S - (L*/S0) ?S M (S1)(RR) Sales admittance = 25% 2004 Profit permissiveness = 2.

70% Payout Ratio = 40% AFN= (A*/S0) ?S - (L*/S0) ?S M (S1)(RR) = (A*/S0)(g)(S0) - (L*/S0)(g)(S0) - M(S0)(1 + g)(1 - payout) = ($1,000/$2,000)(0.25)($2,000)-($ snow/$2,000)(0.25)($2,000)-0.0270($2,000)(1.25)(0.6) = $250 - $25 - $40.5 = $184.5 million. d)How would changes in these items alter the AFN? (1) Sales addition, (2) the dividend payout ratio increases, (3) the profit margin increases, (4) the capital strength ratio increases, and (5) SEC begins compensable its suppliers sooner. (Consider each item one after another and put up all other things constant. 1)Sales increase go bad to more(prenominal) asset required which AFN leave alone be increase 2)If the payout ratio were reduced, and then more earnings would be retained, and this would reduce the need for foreign financing, or AFN. Note that if the firm is profitable...If you want to get a full essay, order it on our website: Ordercustompaper.com

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