Long Term Financial Needs free essay sample

Huffman Trucking Accounting Financial Report As the head of the accounting department it is my role to ensure that my team and I provide you with the information that is needed in order to help propel our company into the future. Being the CEO it is your role to get elements of information from all different departments concerning the different ideas, processes and financial workings in order to help set Huffman Trucking on a prosperous path. My job as the head of accounting is to give you all the financial information gathered by my department to give you a better picture as to our long term financial needs. I will touch upon various points and specific keywords that I will go in more depth about and explain below. I hope this following information suits your needs and that my team and I have done a thorough and detailed job that will allow you to make better-informed decisions. We will write a custom essay sample on Long Term Financial Needs or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Let us begin with explaining what EFN is. EFN is external funds needed and is calculated as the difference between the projected total assets and the projected total liabilities and equity. To calculate the EFN, we start with the income statement to get the amount of net income. To make the income statement, were supplied with a revenue growth of 8% for the next three years. Also, there is extra revenue from new initiatives from consulting and warehousing. All this gives us total revenues. To estimate expenses, we are given the breakdown of fixed and variable expenses for each of the expense items. The fixed expenses increase by the inflation rate, whereas the variable expenses adjust with the change in revenue. Depreciation is given as constant and interest expense is also taken as constant as we have not decided on the financing of the EFN. In addition some new expenses are added due to the new initiatives. This includes salaries for four national accounts managers for each initiative, increase in marketing budget, space rental and increase in operating expenses. Wage benefits and insurance is partly variable and partly fixed. Fuel expenses, purchased transportation, operating supplies are taken as fixed. Tax rate is calculated based on 2006 income statement. No dividends are taken and all income goes towards retained earnings. In the balance sheet, all current assets and current liabilities vary with revenues. We are supplied with the payment period for vendors, supplies and taxes; this has not been used since all current liabilities have been taken to vary with revenues. There is an increase of $10 million for operating property in year 2007 and beyond that there is no increase in operating property. The accumulated depreciation changes with the depreciation expense in the income statement. Assets of discontinued operations; goodwill and other assets are not changed, because there is no information on theses assets. For liabilities, the current portion of long term debt changes with revenue since all current liabilities vary with sales and this amount of long term debt is assumed to be repaid each year and so the value of long term debt reduces each year with payment of the current portion. Accrued pension and post retirement health care is also assumed to vary with revenues since these would increase as the salaries and wages increase with revenue. Total stockholders equity changes by the net income for the period as there are no dividends considered. In looking at the total assets and the total liabilities and stockholders equity calculated, we find the difference to calculate the EFN. For all the three years, the EFN is negative. What this implies is that the company does not need any new external funds. The requirement of investing in assets is met by the increase in current liabilities as also by the net income, which the firm generates. The negative EFN implies surplus with the firm, which it can use to repay some liabilities or to pay dividends.