The AFN equation and the financial statement–forecasting approach both assume that assets grow at relatively the same ra
Posted: Thu Apr 28, 2022 1:47 pm
The AFN equation and the financial statement–forecasting
approach both assume that assets grow at relatively the same rate
as sales. However, the relationship between assets and sales is
often a little more difficult than that. In particular, some firms
use regression analysis to predict the required assets needed to
support a given level of sales.
General Services Corp. has used its historical sales and asset
data to estimate the following regression equations:
General Services Corp. currently has sales of $984,000, but it
expects sales to grow by 20% over the next year. Use the regression
models to calculate General Services Corp.’s forecasted values for
accounts receivable and inventories needed to support next year’s
sales.
Forecasted Values for Next Year
Based on the next year’s accounts receivable and inventory
levels predicted by General Services Corp.’s regression equations,
the firm’s DSO for next year is expected to be________. Use 365
days as the length of a year in all calculations.
approach both assume that assets grow at relatively the same rate
as sales. However, the relationship between assets and sales is
often a little more difficult than that. In particular, some firms
use regression analysis to predict the required assets needed to
support a given level of sales.
General Services Corp. has used its historical sales and asset
data to estimate the following regression equations:
General Services Corp. currently has sales of $984,000, but it
expects sales to grow by 20% over the next year. Use the regression
models to calculate General Services Corp.’s forecasted values for
accounts receivable and inventories needed to support next year’s
sales.
Forecasted Values for Next Year
Based on the next year’s accounts receivable and inventory
levels predicted by General Services Corp.’s regression equations,
the firm’s DSO for next year is expected to be________. Use 365
days as the length of a year in all calculations.