Is the cash balance a consistent percentage of sales

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Reference no: EM132043037

Using the data in the student spreadsheet file P&G. xIsx (to find the student spreadsheets for Financial Analysis with Microsoft Excel, sixth edition,) forecast the June 30, 2011, income statement and balance sheet for Procter & Gamble. Use the percent of sales method and the following assumptions:

(1) Sales in FY 2011 will be $81,000;

(2) The tax rate will be 27.26%;

(3) Each item that changes with sales will be the five-year average percentage of sales;

(4) The preferred dividend will be 219; and

(5) The common dividend payout ratio will be 42% of income available to common stockholders.

a. What is the discretionary financing needed in 2011? Is this a surplus or deficit?

b. Assume that the DFN will be absorbed by long-term debt and that the total interest rate is 4.50% of LTD. Set up an iterative worksheet to eliminate it.

c. Create a chart of cash vs. sales and add a linear trend line. Is the cash balance a consistent percentage of sales? Does the relationship fit your expectations?

Reference no: EM132043037

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