Explain how the working capital accounts (receivables, inventory, payables) are forecasted. Q2 Expain how EBIT is forecasted. Yellow highlighting connects balance sheet debt to income statement interest. Q3 Explain how interest expense is forecasted. Q4 Explain how PPE is forecasted. Q5 Explain how long-term debt is forecasted. Q6 Explain how stockholder's equity is forecasted. Q7 Explain where EFN comes from and explain what it means, i. e., what does the forecast tell you

Q1. Working capital accounts : inventory is forecasted using previous years data, trends, how much goods will be purchased, produced, sold, planned promotions, production cycles and ratios related to inventory.

Accounts Receivables are forecasted using how much products will be sold on credit, debtors collection patterns to determine balances at the end of the year and ratios relating to accounts receivables.

Accounts payable are forecasted using creditors payment patterns, how much goods will be purchased on credit.

Q2 EBIT is forecasted by forecasting the revenues and Expenses.

Q3 interest expense is forecasted using projected debt multiple by projected interest rate, and also taking into account projected repayments and additions of debt.

Q4 PPE is forecasted adding projected additions and subtracting disposals then get the projected balance at the end of the year.

Q5 long term debt if projected by forecasting any debt needed and any repayments of debt

Q6 Stockholder's equity is forecasted by using the forecasted retained earnings from profits and by forecasting any capital raises or repurchase of company shares. Or can be forecasted by taking the forecasted assets subtracting forecasted liabilities.

Q7 EFN comes from the need to grow and financing that growth. EFN stands for External Financing Needed and is the difference between the growth (Asset section) and the funds in retained earnings (equity and liability section)

EFN is first forecasted and the forecast means the business has space for growth or not.