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(Financial forecasting) The balance sheet of the Thompson Trucking Company

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(Financial forecasting) The balance sheet of the Thompson Trucking Company (TTC). TTC;had sales for the year ended 12/31/13 of $49.13 million. The firm follows a policy of paying all;net earnings out to its common stockholders in cash dividends. Thus TTC generates no funds;from its earnings that can be used to expand its operations. (Assume that depreciation expense;is just equal to the cost of replacing worn out assets.) Hint: Make sure to round all intermediate;calculations to at least five decimals places.;a. If TTC anticipates sales of $81.05 million during the coming year, develop a pro forma;balance sheet for the firm for 12/31/14. Assume that current assets vary as a percent of sales;net fixed assets remain unchanged, and accounts payable les vary as a percent of sales. Use;notes payable as a balancing entry.;b. how much new financing will TTC need next year?;c. what limitation does the percent of sales forecast method suffer from? Discuss briefly.;a. If TTC anticipates sales of $81.05 million during the coming year, develop a pro forma;balance sheet for the firm for 12/31/14. Assume that current assets vary as a percent of sales;net fixed assets remain unchanged, and accounts payable les vary as a percent of sales. Use;notes payable as a balancing entry. (Round to the nearest dollar.);Thompson Trucking Company Balance Sheet, December 31;2010 ($ millions);Accounts;$5.04;payable;$15.56 Notes payable $0.00;$26.37 Bonds payable $10.78;Common equity $10.55;Total;$26.37;Current asset;$10.81;Net fixed assets;Total;ThompsonTruckingCompany;ProformaBalanceeSheetasof12/31/14;Current assets;$;Net fixed assets;Total assets;$;Accounts payable;Notes payable;Bonds payable;Common equity;Total liabilities and common equity $;b. TTCs total financing requirements for next year are $;TCCs discretionary financing needs for next year are $;c. What limitations does the percent of sales forecast method suffer from? Discuss briefly.;(select all the choices that apply);A. The financial manager cannot treak the basic method to suit her purposes;B. The method assumes that the current relationships between various accounts and;sales will remain the same, but this need not be the case.;C. The method is only good for constructing pro forma statements for the following year.;D. The method is very difficult to implement even when good and reliable forecasted;data are available.

 

Paper#23197 | Written in 18-Jul-2015

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