BUS-4072_FouchTashia_Week6Assignment

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Capella University *

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4072

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Business

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Apr 30, 2024

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pdf

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5

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Week 6 Assignment: Forecasting, Budgeting and Projecting Requirements Tashia Fouch Capella University BUS-4072: Analysis for Financial Management Professor Robert Watson February 2024
Problem 8 TABLE 3.5 Forecasting with a Spreadsheet: Pro Forma Financial Forecast for R&E Supplies, Inc., December 31, 2018 ($ thousands) Table 3.5 presents a computer spreadsheet for estimating R&E Supplies’ external financing required for 2018. The text mentions that with modifications to the equations for equity and net sales, the forecast can easily be extended through 2019. Write the modified equations for equity and net sales. Equity = Common Stock + Retained Earnings Equity = 1,808 + 78 Equity = 1,886 Net Sales = Net sales + (Net sales x 25%) Net Sales = 25,766 + (25,766 x 25%) Net Sales = 25,766 + 6,441.50 Net Sales = 32,207.50
Problem 9 A spreadsheet containing R&E Supplies’ 2018 pro forma financial forecast, as shown in Table 3.5, is available for download from McGraw- Hill’s Connect or your course instructor (see the Preface for more information). Using the spreadsheet information presented next, and the modified equations determined in question 8 earlier, extend the forecast for R&E Supplies contained in Table 3.5 through 2019. a. What is R&E’s projected external financing required in 2019? How does this number compare to the 2018 projection? To answer this, I first had to figure out the amounts in 2017 by using the given forecasted amounts of 2018 and the percentage changes. Based on this, I got the following figures for 2017: Forecast: Net sales: 20,613 25% increase from 2017 COGS: 17,727 86% of net sales Gross profit: 2,886 General/selling/admin expenses: 2,474 12% of net sales Interest expense: 210 10% increase from 2017 Earnings before tax: 202 Tax: 91 45% of earnings before tax Earnings after tax: 111 Dividends paid: 56 50% of earnings after tax Additions to retained earnings: 56 Next, I forecasted for 2019 using the amounts for 2017 and 2018, and got the following figures: Forecast: Net sales: 26,798 30% increase from 2017 COGS: 23,045 86% of net sales Gross profit: 3,752 General/selling/admin expenses: 2,948 11% of net sales Interest expense: 231 10% increase from 2017 Earnings before tax: 573 Tax: 258 45% of earnings before tax Earnings after tax: 315 Dividends paid: 158 50% of earnings after tax Additions to retained earnings: 158 With the forecasted amounts for 2019, I then used the balance sheet for 2018 to project the balance sheet for 2019 and compare the external financing required:
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