At the most recent strategic planning meeting, the board of directors of your co
ID: 2423509 • Letter: A
Question
At the most recent strategic planning meeting, the board of directors of your company has voted to issue additional stock to raise capital for major expansions for the company in the next five years. The board is considering $5 million. Take the most recent financial statements and prepare a set of projected financial statements based on the given assumptions. The CEO requests that you prepare a written report (including the financial statements) for her.
A. Generate a projected income statement based on the given scenario.
B. Analyze the impact on the income statement based on the given scenario.
Explanation / Answer
Yes it is very good decision taken by management of the company. Since assets of the company financed by equity is good option for the company because it will not increase financial burden.
If assets are financed by the liability (out side lones) then company may suffer due to interest expense burden.
In the given situation issue of additional stock will not show any impact on income statement since there is no interest expense. If company wants to give dividends to shareholders then it impacts the statement of retained earnings not current year incomes and income statement. Threfore, no need to prepare any projected income statement for this decision making.
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