Entrepreneurial Finance

1- Abreviated Income Statement $ thousands, except EPS 31-Dec-20 31-Dec-19 Total Revenue 1,710,700 720,425 Cost of Goods Sold 420,284 233,369 Gross Profit 1,290,416 487,056 Operating Expenses 67,340 54,288 Operating Income 1,223,076 432,768 Interest & Taxes 459,583 296,560 Net Income 763,493 136,208 EPS, 50,000,000 shares outstanding 15.27 2.72 (Round all answers to two decimals, ie 12.00)
a) Calculate the degree of operating leverage (DOL).
b) Calculate the degree of financial leverage (DFL).
c) Calculate the degree of combined leverage (DCL).
2- What do the degree of operating leverage (DOL, degree of financial leverage (DFL), and degree of combined leverage (DCL) You obtained in the previous question mean? Explain fully using your results.
3- Your company has the sales for year 1 below. You want to select from one of three models for forecasting: a three-month moving average, a weighted moving average (you believe that the weights should be 0.2, 0.3, and 0.5), and an exponential smoothing average in which you use an alpha of 0.2 and an assumed forecast for January of year one of $ 35,000. Determine sales forecast for January year 2 and calculate MAD.
Jan Yr 1 35826

Feb 34561

Sea 31501

Apr 32429

May 34681

Jun 35022

Jul 35640

Aug 35896

Sep 34542

Oct 32580

Nov 31 971

Dec 32900

A) Three-month moving average:

Sales forecast: $

MAD:

B) Weighted moving average:

Sales forecast: $

MAD:

C) Exponential moving average:

Sales forecast: $

MAD:

Which forecasting method should you use for your company? (enter A, B, C):
4- a.I In your business, assets, and liabilities have historically varied with sales. Assets are usually 78 percent of sales, and liabilities are usually 46 percent of sales. Your sales next year will be $ 223,000 which represents an increase of $ 48,000. Your profit margin is 12.16 percent. You anticipate that you will have a 42 owner payout of net profit. Using the percentage of sales method, determine the amount of additional financing or surplus for your business next year. (answer to two decimal places, negative numbers start with -)