Using Accounting Information for Decisions The chief financial officer (CFO) of Flash Bulb and Seed Company has prepared the following projections for the month of August.
|
Expected sales |
$480,000 |
|
Projected monthly resources consumed: |
|
|
Rent |
$85,000 |
|
Utilities |
2,900 |
|
Wages |
274,000 |
|
Advertising |
115,000 |
|
Repairs |
12,000 |
|
Supplies |
2,500 |
|
Total cost of resources consumed |
491,400 |
|
Projected loss |
($11,400) |
Although Flash Bulb and Seed Company predicts a loss for August, the CFO is confident that sales will increase in the future.
Required
A. Why is it important that the CFO prepare a document like this?
B. If the company came to your bank requesting a loan, how would you respond? From the data given, does the firm appear that it is likely to be able to repay a loan? Why?