Description
The purpose of financial forecasts is to assess current and future fiscal conditions to inform policy and other important decisions. Financial forecasts are fiscal management tools that presents estimated information based on past, current, and projected financial conditions. This assignment will measure your understanding of the purpose for, and importance of financial forecasts and how they contribute to decision making. Before beginning the assignment, please read the rubrics carefully to understand the expectations and how your work will be graded. Please write your answers succinctly and remain on topic, answering only to what is asked.
Problem Set
Stock Price Forecast
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Problem # 1: Refer to the stock price forecast table provided and any other resource material you deem necessary to address the following:
- Summarize the forecast using 6-10 brief bullet points
- In 100-200 words explain how the forecasters might have utilized the historical data for the stock price to forecast future stock prices and the methodology for forecasting that the forecaster might have used.
- What assumptions did the forecaster use? What might be some of the rational for making the assumptions? How would different assumptions affect the forecast? (100-200 words)
- If you were advising investors regarding the organization’s stocks, what would you tell them? Comment on when, and how much (if any) investment should be done, the return they can expect, time frames, and possible risks. (100-200 words)
Problem # 2: For this question, please refer to the Dino’s After School Trial Balance with ending totals for December 31, 2014 in the table below:
| Account | Balance ($) |
|---|---|
| Checking | 15,220 |
| Savings | 58,500 |
| Money Market | 41,650 |
| Pre-Paid Rent | 5,400 |
| Accounts Receivable | 81,000 |
| Accounts Receivable Allowances | -6,500 |
| Machinery | 122,600 |
| Equipment | 80,300 |
| Automobiles | 67,500 |
| Accounts Payable | 60,000 |
| Loans Payable | 21,300 |
| Equity | 384,370 |
- Using an Excel Spreadsheet, create the Balance Sheet for Dino’s After School.
- Using the information obtained from your Balance Sheet, calculate any one (1) liquidity and any one (1) leverage ratio.
- Comment on the financial position of the organization, specific to the two ratios you calculated. What is the main reason that Dino’s (and other organizations) need a Balance Sheet? (100-200 words)
Problem # 3: Please refer to the corporate tax rates table and the Gross Profit Chart below:
| Account | Balance ($) |
|---|---|
| 0 to 50,000 | 15% |
| 50,000 to 75,000 | $7,500 + 25% of the amount over 50,000 |
| 75,000 to 100,000 | $13,750 + 34% of the amount over 75,000 |
| 100,000 to 335,000 | $22,250 + 39% of the amount over 100,000 |
| 335,000 to 10,000,000 | $113,900 + 34% of the amount over 335,000 |
| 10,000,000 to 15,000,000 | $3,400,000 + 35% of the amount over 10,000,000 |
| 15,000,000 to 18,333,333 | $5,150,000 + 38% of the amount over 15,000,000 |
| 18,333,333 and up | 35% |
| Fiscal Year | Gross Profit ($) |
|---|---|
| June, 2009 – May, 2010 | 261,100 |
| June, 2011 – May, 2012 | 277,500 |
| June, 2012 – May, 2013 | 292,000 |
| June, 2013 – May, 2014 | 300,900 |
- Given the information provided here perform your own calculations to show the amount of corporate tax paid for each of the four (4) fiscal years covered in the table above.
- Is there a pattern? Explain the pattern and what it may suggest about the future performance of the organization. How can this conclusion advise investors and organizational decision makers?
- If there was a 20% reduction in the Gross Profit for fiscal year 6/12 – 5/13, how might this have changed the gross profit expectations for the 6/13 – 5/14 fiscal year? Provide rationale.
- Calculate the total expected taxes that would have been paid for these two fiscal years, with the 20% reduction in 6/12 – 5/13 and the resultant expected change in the 6/13 – 5/14 gross profit.
Problem # 4: Explain the concept of departmentalized accounting and the importance of collaboration between departments within an organization, to its success. You may use organizational examples. (200-350 words)