1. One method of estimating the effects of growth is the sustainable growth model. What are the assumptions inherent with this model?
2. Another method of estimating growth is for firm managers to forecast pro forma financial statements. How are the sales forecasts that are necessary to create pro forma statements derived?
3. Why might the estimates for external fund required differ between using the percentage-of-sales method to estimate pro forma statements and using the shorthand approach in Equation 15.2?
4. If sales volume fluctuates in the short-term around the long-term estimated trend, what alternative financing strategies might be considered?
5. Discuss how managers might monitor company cash flows and outflows on a day-to-day basis.
Burrito Brothers, Incorporated, a regional restaurant chain, has decided to expand nationwide and consequently, expects rapid growth. As Burrito Brothers new CFO you are in charge of planning for this growth. Before beginning this planning, you decide to refresh your knowledge of financial planning by answering the following questions.