# Global Gold Inc. Financial Analysis (2021–2022) Below are concise answers to your multiple-choice questions, with calculations and explanations based on the provided financial statements. --- ## 1. Dollars Forecast to Be Paid Out as Dividends in 2022 ### Data - **Net Income (2022):** $106,145 - **Dividends (2022):** $42,458 (from the pro forma income statement) ### Answer **$42,458** is forecast to be paid out as dividends in 2022. **Correct choice:** None of the answers presented are correct. --- ## 2. Total Assets Forecast for 2022 ### Data - **Total Assets (2021):** $508,000 - **Forecasted Sales Growth (2022):** 20% - **Sales (2021):** $905,000 - **Sales (2022):** $1,086,000 ($905,000 × 1.20) #### Assuming assets grow proportionally to sales (common in pro forma projections): \[ \text{Forecast Total Assets}_{2022} = \text{Total Assets}_{2021} \times \frac{\text{Sales}_{2022}}{\text{Sales}_{2021}} \] \[ \text{Forecast Total Assets}_{2022} = \$508,000 \times \frac{1,086,000}{905,000} = \$508,000 \times 1.20 = \$609,600 \] ### Answer **$609,600** **Correct choice:** $609,600 --- ## 3. Total External Financing Required (EFR) for 2022 ### Formula \[ \text{EFR} = (\text{A}/S) \Delta S - (\text{L}/S) \Delta S - (PM \times \text{Sales}_{2022} \times (1 - \text{Dividend Payout Ratio})) \] Where: - \(A/S\): Total assets to sales ratio ($508,000 / $905,000 = .561) - \(L/S\): Spontaneous liabilities to sales ratio ($74,000 / $905,000 = .082) - \(\Delta S\): Change in sales = $1,086,000 - $905,000 = $181,000 - \(PM\): Profit margin = Net income / Sales = $106,145 / $1,086,000 = .0978 - Dividend payout ratio = $42,458 / $106,145 = .40 #### Step 1: Asset Requirement \[ .561 \times 181,000 = \$101,541 \] #### Step 2: Spontaneous Liabilities Increase \[ .082 \times 181,000 = \$14,842 \] #### Step 3: Addition to Retained Earnings \[ \text{Addition to RE} = .0978 \times 1,086,000 \times (1 - .40) = .0978 \times 1,086,000 \times .60 = \$63,687 \] #### Step 4: Plug Into EFR Formula \[ \text{EFR} = 101,541 - 14,842 - 63,687 = \$23,012 \] #### Check Multiple Choice Options The closest answer is **None of the answers presented are correct**. --- ## 4. Possible Solutions to Satisf 2022 Financing Needs ### Options: - Increase short-term debt - Reduce the dividend payout ratio - Increase long-term debt - Issue new common stock **All of the above** are valid ways to meet financing needs. ### Answer All except “None of the answers presented are correct” are valid. --- ## 5. EFR if Operating at 75% Capacity ### Explanation: If currently operating at 75% capacity, the firm can increase sales by up to 33% (from 75% to 100%) without needing new fixed assets. Thus, only current assets (not fixed assets) need to increase with sales, reducing the EFR. #### Step 1: Calculate the portion of assets that are current - Current assets (2021): $144,000 - Total assets: $508,000 - Current asset ratio: $144,000 / $508,000 = .283 #### Step 2: Only current assets require increase with sales \[ \text{Required increase in assets} = .283 \times 181,000 = \$51,223 \] #### Step 3: Subtract increase in spontaneous liabilities and addition to retained earnings (from earlier) - Increase in spontaneous liabilities: $14,842 - Addition to RE: $63,687 \[ \text{EFR} = 51,223 - 14,842 - 63,687 = -\$27,306 \] A negative EFR means **no external funding required**; internal funds cover needs. ### Answer **None of the answers presented are correct because the firm has sufficient internally generated funds to support its growth.** --- ## Summary Table | Question | Correct Answer | |----------|----------------------------------------------------------------| | 1 | None of the answers presented are correct ($42,458) | | 2 | $609,600 | | 3 | None of the answers presented are correct ($23,012) | | 4 | Increase short-term debt, reduce dividend payout, increase LTD, issue new common stock | | 5 | None of the answers presented are correct; firm needs no EFR | --- **Note:** Calculations are based on standard pro forma financial statement methods. Assumptions and rounding differences may exist based on the source of options.