Reference no: EM131978923

Question: H & M Corporation is evaluating its financing requirements for the coming year. The firm has only been in business for 1 year, but its CFO predicts that the firm's operating expenses, current assets, net fixed assets, and current liabilities will remain at their current proportion of sales. Last year H & M Corp. had $15 million in sales with net income of $1.5 million. The firm anticipates that next year's sales will reach $18 million with net income rising to $3 million. Given its present high rate of growth, the firm retains all its earnings to help defray the cost of new investments. The firm's balance sheet for the year just ended is found below: H & M Corporation Balance Sheet 12/31/2000 % of Sales Current assets $6,000,000 40% Net fixed assets 9,000,000 60% Total $15,000,000 Liabilities and Owners' Equity Accounts payable $3,750,000 25% Long-term debt 4,250,000 NAa Total liabilities $8,000,000 Common stock 2,000,000 NA Paid-in capital 2,800,000 NA Retained earnings 2,200,000 Common equity 7,000,000 Total $15,000,000 aNot applicable. This figure does not vary directly with sales and is assumed to remain constant for purposes of making next year's forecast of financing requirements.

1- Estimate H & M corp. total financing requirements (i.e., total assets) for 2001 and its net funding requirements (DFN)

2- Give a brief summary of forecasting to determine additional (discretionary) funding (financing) needed for above.