Essay on Long Term Financial Needs

723 Words Jul 19th, 2015 3 Pages
Long-Term Financial Needs
Tad Mendez
FIN 486
May 3, 2015
Cyndie Shadow

Long-Term Financial Needs
Determining long term financial needs can be important because they allow the finance section of an organization layout the future expenses for the next year. Pro forma balance sheets detail the projected funds required for the following year. There are also year-end ratios that must be calculated to determine the health of the organization. This financial report will also include how the numbers were obtained for each of the ratios and whether or not the organization will require external funds. There assumptions for the pro forma sheet will be retrieved from the New Strategic Directions Memo.
EFN Calculation
EFN is known as
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To determine the asset ratio, the revenue is divided by the total assets.
Explanation of Calculations
Here is a brief explanation of each ratio and what each calculation presented. As previously stated to obtain the gross profit the cost of goods or services is subtracted from the revenue. Since there are no clear goods or services on the balance sheet, the total operating costs were taken in to use for this equation. The number comes out to a cash equivalent and that profit number must be divided by the total revenue. This calculation gives a decimal number to be converted to a percentage. For 2011 the gross profit percentage was 9% and for 2012 it was 8.68%. To obtain the current ratio the total assets are divided by the total assets/total liabilities. For 2011 and 2012 the current ratio would be 1.64 even though the total assets and liabilities are different. Finally, to obtain the asset ratio the revenue is divided by the total assets. In 2011 the asset ratio was 4.15 and 2012 the asset ratio was 4.36. With the asset ratio the higher the number the more efficient the company is. The higher number for 2012 indicates that Huffman Trucking is projected to use their assets more efficiently.

Assumptions
In the New Strategic Directions Memo there were directed items to be fixed and variable. These items on the balance sheet were assumed fixed and variable in the memo and did not require further assumption from the…