You are the most creative analyst for Spotted Skunk Soft Drink Company, and your admirers want to see you work your analytical magic once more.

	This Years Actual Results	Next Years Initial Forecast
Net sales	$16,000,000	$17,280,000
Cost of goods sold	12,800,000	13,824,000
Gross profit	$3,200,000	$3,456,000
Fixed operating costs except depreciation	800,000	800,000
Depreciation	320,000	345,600
Earnings before interest and taxes	$2,080,000	$2,246,400
Interest	320,000	320,000
Earnings before taxes	$1,760,000	$1,926,400
Taxes	704,000	770,560
Net income	$1,056,000	$1,155,840
Common dividends	570,240	570,240
Addition to retained earnings	$485,760	$585,600
Earnings per share	$0.21	$0.23
Dividends per share	$0.11	$0.11
Number of common shares (millions)	5.00	5.00

Which of the following are assumptions made by the initial income statement forecast? Check all that apply.

No excess capacity currently exists.

Spontaneously generated funds will sufficiently cover any financing needs.

The cost of sales percentage for Spotted Skunk Soft Drink Company will decrease due to economies of scale.

Spotted Skunk Soft Drink Company will be issuing additional shares of common stock in the coming year.

Spotted Skunk Soft Drink Company will be issuing additional debt in the coming year.

Suppose Spotted Skunk had neither sufficient excess capacity to handle any forecasted increases in operations nor sufficient retained earnings to increase the level of company asset up to the amount necessary for production. This deficiency is called .

• additional funds needed
• alternative fiduciary necessities
• added fair needs

These funds could be acquired in which of the following forms? Check all that apply.

Borrowing from a bank using notes payable

Issuing long-term bonds

Repayment of outstanding bonds

Repurchase of outstanding common stock