Questions for control
Date: 2015-10-07; view: 595.
Unit 18
1.What are the key components of a cash budget?
2.What answers should financial planning give to the manager?
3.What is the purpose of long-range planning?
4.What are the major decision areas involved in developing a plan?
5.What is the percentage of sales approach?
Tasks:
1.Based on the following information for the Corwin Company, what is AFN if sales are predicted to grow by 20 percent? Use the percentage of sales approach. The payout ratio is constant.
CORWIN COMPANY Financial Statements:
Income Statement
| Sales | $2,750 |
| Cost of sales | 2,400 |
| Tax (34%) | |
| Net income | $ 231 |
| Dividends | $ 77 |
Balance sheet
Current assets $ 600 Long-term debt $ 200
Net fixed assets 800 Equity 1,200
Total $1,400 Total $1,400
2.Calculating EFN The most recent financial statements for Gletglen Co. are shown below:
| Income Statement | Balance Sheet | ||||
| Sales | $2,000 | Assets | $5,000 | Debt | $3,000 |
| Costs | Equity | 2,000 | |||
| Net income | $1,150 | Total | $5,000 | Total | $5,000 |
Assets and costs are proportional to sales. Debt is not. No dividends are paid. Next year's sales are projected to be $2,300. What is the external financing needed (EFN)?
3. The most recent financial statements for Aprostate Co. are shown below.
Income Statement Balance Sheet
| Sales | $2,500 | Current assets | $2,000 | Current liabilities | $ 800 | ||
| Costs | 2,000 | Fixed assets | 4,000 | Long-term debt | 1,200 | ||
| Taxes | Equity | 4,000 | |||||
| Net income | $ 300 | Total | $6,000 | Total | $6,000 |
Assets, costs, and current liabilities are proportional to sales. Long-term debt is not. Aprostate maintains a constant 60 percent dividend payout. Next year's sales are projected to be $2,900. What is the external financing needed (EFN)?
4. Weatherford Industries Inc. has the following relation: A*/S = 1,6; L/S = 0,4; profit margin = 0,10; the dividend payout ratio = 45%. Sales last year was $100 million, Assuming the constancy of the ratios, apply the formula AFN to determine the maximum growth rate, which the Corporation Weatherford will be able to achieve without the need of attracting external funds.
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