Problem on Forecasting & Budgeting - Project Planning & Budgeting Assignment Help

Assignment Task

Question 1 - Problem on Forecasting & Budgeting The assets and current liabilities of XYZ FC vary in direct proportion to the increase in sales. The current sales are $15,400,000 and you are planning for an increase of 30% next year. Net income is currently at 15% of sales. The club is not planning on issuing any more common stock, but it plans to pay dividends in accordance with its regular dividend policy, which means the payout ratio of 20%. Retained earnings will be 80% of the net income. See further information on the current Balance Sheet below.

Required:

a) Using this information, compile the pro forma (=projected) Income Statement and Balance Sheet shown below.

b) Answer if the club will be able to finance its increase in sales solely through the retained earnings. If not, what will be the amount of additional external financing needed (EFN)?

c) If the club is not able to secure additional debt financing, what advice would you give to revise this budget?

Question 2 – Problem on Break-Even Analysis
Mary is trying to decide whether her new take-away place near local sports grounds will be able to break-even. Her estimation of sales for the next 6 months period is
€45,000. She also collected some information on costs (totals for 6 months):

Variable costs: cost of raw materials € 19,000, labour costs € 16,000, Fixed costs: depreciation € 3,500, rent € 1,800, telephone € 100, electricity € 900, other expenses € 4,000

Required:
a) Answer if Mary will be able to break-even. Identify the break-even point (in €) per 6 months period and per month.
b) Make one helpful suggestion to Mary (with supporting calculations) on how she could reach/improve the break-even point?

Question 3 Using the accounting and finance terms which you learned in this course, create a portrait of a poorly performing organisation. In other words, describe the signals of a bad financial performance visible on financial statements.

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