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1) Assume 2014 sales are projected to rise by 15% over 2013 sales. Use forecasted financial statement method to forecast the balance sheet and income statement for December 31, 2014. Interest rate on all debt is= 10% and cash earns no interest income. Suppose that all extra debt in the form of the line of credit is added at the ending of year that means that you must base forecasted interest expense on balance of debt at the commencement of year. Use forecasted income statement to find out addition to retained earnings. Suppose that company was operating at full capacity in 2013, that it can’t sell off any of its fixed assets, and that any required financing will be borrowed as notes payable. Also, suppose that assets, spontaneous liabilities, and operating costs are expected to increase by same percentage as sales. Find out the extra funds needed. Determine the resulting total forecasted amount of line of credit?

Basic Finance, Finance

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