Problem Day Forecasting Blackboard

Problem Day Forecasting Blackboard - Problem Day: Financial...

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Unformatted text preview: Problem Day: Financial Forecasting Housekeeping Items Phillips Petroleum POW Quiz due Thursday at 5pm 2 POW Review Sessions this week. Take your Pick: o Thursday at 5pm in room 210 o Friday at 8am in room 374 Ch. 5 Reading Quiz due Monday morning at 8am Course email: Busm301@gmail.com POW Hint EPS = Net Income / Outstanding Shares Todays Agenda Quick Review of ROE Cash Budgeting Forecasting o Percent of Sales Method Sustainable Growth ROE Leverage Multiplier Revisit Assets $1mm Liabilities $500k Equity $500k = Assets $1mm = Liabilities $800k Equity $200k ROE = 50 / 500 = 10% Net Income = $50k ROE = 50 / 200 = 25% The same amount of net income is available to less equity holders. We changed nothing in the firm except how its financed! Cash Budget Cobra Kai collects 60% of its sales during the month of the sale, 30% one month after the sale, and 10% two months after the sale. The company expects sales of $10,000 in August, $20,000 in September, $30,000 in October, and $40,000 in November. How much money does Cobra Kai expect to collect in October? o Answer: $25k The beginning cash balance for October is $50,000. Cash outflows for October are $35,000 and cash outflows for November are $15,000. Cobra Kai has a minimum required cash balance of $50,000. How much does Cobra Kai need to borrow to maintain its minimum cash balance? o Answer: $10k Gordon Gekko, Inc. Use the Percent-of-Sales method to calculate the Pro Forma Balance Sheet Use the follow ing information and the percent of sales method to answ er questions. Below is the 2004 year-end balance sheeet for Gordon Gekko, Inc. Sales for 2004 w ere $1,600,000 and are expected to be $2,000,000 during 2005. In addition, w e know that Banner plans to pay $50,000 in 2005 dividends and expects projected net income of 4% of sales. Assume that fixed assets increase w ith sales. Gordon Gekko, Inc. Balance Sheet December 31, 2004 Assets Current assets $890,000 Net fixed assets 1,000,000 Total $1,890,000 Liabilities and Owners' Equity Accounts payable $160,000 Accrued expenses 100,000 Notes payable 700,000 Long-term debt 300,000 Total liabilities 1,260,000 Common stock 360,000 Retained earnings 270,000 Total equity 630,000 Total $1,890,000 Correct Answer: b GG's projec ted c urrent assets for 2005 are: a. $1,000,000 b. $1,112,500 c . $1,500,000 d. $1,260,500 2004 Sales = $1,600,000 CA = $890,000 CA Sales = 55.6% Using Percent-of-Sales on Spontaneous Accounts 2005 Sales = $2,000,000 CA Sales CA = ?...
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This note was uploaded on 10/23/2011 for the course BUS M 301 taught by Professor Jimbrau during the Fall '11 term at BYU.

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Problem Day Forecasting Blackboard - Problem Day: Financial...

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