Prepare the operating forecasts for 2020 and 2021 using the 2019 percent of sales method. (Fill in the blanks). Plug Debt to balance the forecasts.

Questions:

1. Prepare the forecasts for 2020 and 2021. Note: the 2020 actuals are not complete yet and the CFO needs an estimate to show the CEO (12 marks)
2. Calculate the Current and Debt to Equity Ratios for 2020 (2 marks)
3. What is an implication of preparing the forecasts using the top-down method? (1 mark)

Actual 2019 1,000,000 Industry Market share 20% FCT 2020 1,500,000 20% Forecast 300,000 FCT 2021 1,750,000 20% Forecast 350,000 % of sales 105,000 122,500 Sales Material Labour Factory Overhead COGS Gross Profit Selling Corporate Overhead Operating Profit (op) Taxes (% of OP) Net Income 25.00% 35.00% 20.00% 80.00% 20.00% 5.00% 10.00% 5.00% 25.00% 3.75% 200,000 50,000 - 70,000 40,000 160,000 40,000 - 10,000 20,000 10,000 2,500 7,500 Cash Accounts Receivable Inventory Fixed assets Total % sales 5.00% 20.00% 10.00% 100.00% 10,000 40,000 20,000 200,000 270,000 10.00% Plug to Balance Fixed Accounts Payable Debt Common Stock Opening RE Net Income Total 20,000 120,000 120,000 2,500 7,500 270,000 120,000 10,000 120000 21,250