6. Projected financial statements and basic analysis You are the most creative analyst for Saltwater Logistics Corp., and your admirers want to see you work your analytical magic once more. 2016 Actual Results 2017 Initial Forecast Net sales $22,000 (17,600) Cost of goods sold $20,000 (16,000) $4,000 (1,000) Gross profit $4,400 Fixed operating costs except depreciation (1,100) (440) Depreciation (400) Earnings before interest and taxes $2,600 $2,860 Interest (400) (400) Earnings before taxes $2,200 $2,460 Taxes (880) (984) Net income $1,320 1,476 Common dividends (712.8) (712.8) Addition to retained earnings $607.2 $763.2 Earnings per share $66 $73.8 $35.64 $35.64 Dividends per share Number of common shares (millions) 20.0 20.0 Which of the following are assumptions made by the initial income statement forecast? Check all that apply. The forecasted increase in net sales is 10%. The facility is not currently operating at full capacity. The assigned depreciation method has changed. No additional external financing will be required. The facility is currently operating at full capacity. Additional external financing will be required by Saltwater Logistics Corp. 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 I and II III and IV O II O I and IV III O IV 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 Increase the length of the operating cycle Increase charges against net income, reducing the amount of available internally generated funds Spontaneously increase liabilities associated with the cost of goods sold Reduce the level of cash on hand