6. Projected financial statements and basic analysis Aa Aa You are the most creative analyst for Green Rabbit Transportation Inc., and your admirers want to see you work your analytical magic once more. 2016 Actual 2017 Initial Results Forecast Interest Earnings before taxes Addition to retained earnings Net sales Gross profit Cost of goods sold Taxes Dividends per share Common dividends Earnings per share Fixed operating costs except depreciation Number of common shares (millions) Earnings before interest and taxes Depreciation Net income (340) $1,870 $516 $17,000 $3,400 (13,600) (748) $30 (606) $56 (850) 20.0 $2,210 (340) $1,122 (340) $2,754 $1,046 $23,800 $4,760 (19,040) (1,102) $30 (606) $83 (1,190) 20.0 $3,094 (476) 1,652 Which of the following are assumptions made by the initial income statement forecast? Check all that apply No additional external financing will be required The facility is not currently operating at full capacity Additional extemal financing will be required by Green Rabbit Transportation Inc. The forecasted increase in net sales is 40%. The facility is currently operating at full capacity The assigned depreciation method has changed Which of the following could be a direct cause of financing feedback? I. Issuing additional common stock II. Purchasing additional buildings with internally generated funds III. An unexpected increase in sales IV. Borrowing from the bank O I and IV II and IV I and II and IV What is one of the potential consequences of financing feedback that might cause the actual financing needs to be higher than initially thought? Financing feedback might O Spontaneously increase liabilities associated with the cost of goods sold Reduce the level of cash on hand Increase charges against net income, reducing the amount of available internally generated funds Increase the length of the operating cycle