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FINA - Individual Assignment #1

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33 views

FINA - Individual Assignment #1

fina fucvk around and find out

Uploaded by

laurenchristyna9
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Assignment #1 – Forecasting via CONNECT

Question 1 (10 Points)

Explain how to best derive a sales projection.

Question 2 (10 points)

Gibson Manufacturing Corporation expects to sell the following number of units of steel cables at the
prices indicated, under three different scenarios in the economy. The probability of each outcome is
indicated.

Probabilit
Units Price
Outcome y

A 0.70 225 $20

B 0.10 370 35

C 0.20 510 45

What is the expected value of the total sales projection?

Total expected value $


Question 3 (10 points)

All Metal Bearings had sales of 13,000 units at $35 per unit last year. The marketing manager projects a
20 percent increase in unit-volume sales this year with a 20 percent price decrease (due to a price
reduction by a competitor). Returned merchandise will represent 6 percent of total sales.

What is your net dollar sales projection for this year?

Net sales $

Question 4 (30 points)

Carter Paint Company has plants in four provinces. Sales last year were $100 million, and the balance
sheet at year-end is similar in percent of sales to that of previous years (and this will continue in the
future). All assets and current liabilities will vary directly with sales. Assume the firm is already using
capital assets at full capacity.

Balance Sheet
(in $ millions)

Assets Liabilities and Shareholders' Equity

Cash $10 Accounts payable $4

Accounts receivable 14 Accrued wages 3

Inventory 20 Accrued taxes 2

Current assets 44 Current liabilities 9

Capital assets 44 Long-term debt 25

Common stock 30

Retained earnings 24

Total assets $88 Total liabilities and shareholders' equity $88

The firm has an aftertax profit margin of 3 percent and a dividend payout ratio of 30 percent.

a. If sales grow by 20 percent next year, determine how many dollars of new funds are needed to finance
the expansion. (Do not round intermediate calculations. Enter the answer in millions. Round the final
answer to 3 decimal places.)

The firm needs $ million in external funds.


b. Prepare a pro forma balance sheet with any financing adjustment made to long-term debt. (Do not
round intermediate calculations. Input all answers as positive values. Be sure to list the assets and
liabilities in order of their liquidity. Enter the answers in millions. Round the final answers to 2 decimal
places.)

ASSETS

Accounts receivable Prepaid expenses Inventory Capital Asset Cash $

Inventory Accounts receivable Cash Prepaid expenses Capital Asset

Cash Inventory Gross plant Prepaid expenses Accounts receivable

CURRENT ASSETS

Capital Assets Cash Inventory Accrued wages Accounts Receivable

Total Assets $_____________

L +OE

Accounts payable Accrued taxes Retained earnings Common stock Accrued wages $

Accrued wages Retained earnings Accounts payable Common stock Long-term debt

Accrued taxes Retained earnings Accounts payable Common stock Long-term debt

CURRENT LIABILITIES

Long-term debt Accrued wages Accounts payable Accrued taxes

Common stock Accrued wages Accounts payable Accrued taxes $

Retained earnings Accrued wages Accounts payable Accrued taxes

Totsal L + SE $________________
c. Calculate the current ratio and total debt to assets ratio for each year. (Do not round intermediate
calculations. Round the final answers to 1 decimal places.)

Year 1 Year 2

Current ratio X X

Total debt / assets % %

Question 5 (5 points)

The cost of oil is particularly important in projecting manufacturing, transportation, and production costs
of a company. How would you propose reducing reliance on variable oil prices to improve financial
forecasting?

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