1. In creating pro forma financial statements for a company, spontaneously generated funds:
would be treated as an automatic increase in available funds
would decrease retained earnings available to the company
will increase the capital needed in the coming year
would increase the assets needed to support an increase in sales
have no impact on projected financial statements or financing needs
2. Relying on the capital intensity ratio would allow a company to estimate:
the degree of probable improper accumulation on the books
the impact of financing feedbacks on projected assets
the transaction costs incurred in issuing securities
the amount of assets needed to support expanded sales
the real versus the nominal cost of capital to the firm