Casanav Simmons
Mba-730
July 5, 2012
Financial Forecasting- Oats ‘R’ Us

The oats R Us should proceed preparing a financial forecast by using the growth rate method. Using this method will give the company a maximum growth in sales that the company can get, without changing the debt and equity ratio. The internal growth rate model forecast shows that the firm will not raise any external capital. The model gives the maximum growth in sales that can be supported without doing external financing. 
 The industry growth forecast had been estimated at 30% each year. The percentage of sales method can also be used being that all other expenses in the income statement should grow at the rate of sales. If the debt equity ratio remains constant the firm would be operating at capacity, which would cause assets to increase faster then the sales. Then the asset turnover may fall making the assumption not realistic. The debt to equity remains the same the company’s debt will get higher by the same percentage as its equity. If the Company were running at a full capacity the additional funding would be 25%-92,066, 30%-136,867, 35%-181,668, and 40% at 226,470. After Jim conducts a interview with the production manager and he discovers that the company is running at a 90% rate then the additional funding would totally change resulting in 25%-43, 941 30%-86,817, 35%-129,693, and 40% at 172,570. Some actions that Mason could take to alleviate some of the need would be to increase the liabilities by getting more credit from suppliers and would reduce the need for external financing. They could increase the Net margin because in 2004 it was 4.68, which is very low. They could also reduce the collection period this could help the company by to speed up the collection period of receivables. The financial condition within the company is not very critical but in