Q: How do we know that accrued liabilities are projected to grow at the sales growth rate?

A: We don't really know that accrued liabilities will grow at the sales growth rate.These projections represent our best guess of what is likely to happen in 2019. It is reasonable to expect accrued liabilities to grow at the sales growth rate, because accrued liabilities usually grow at the same rate as operating expenses, and operating expenses usually grow at the same rate as sales.

However, if we have any reason to believe that accrued liabilities would grow at some other rate, or are linked to the growth of some other account, then we need to pursue that possibility.

Q: The 2019 financing requirement is $60,504. Would you see that on the balance sheet on 2019 as new LTD?

A: On a projected balance sheet, the new long-term debt would likely be divided between current maturities of long-term debt and remaining long-term debt, but would not normally be broken out separately from any existing long-term debt.

A footnote to the financial statements might explain the break-out between existing and new long-term debt in the projection period. The reporting depends on the accountant or the bookkeeper who put the projected balance sheet together.

Q: Would taking a salary of 2% of sales also increase operating expenses in the amount of the payroll tax the business is responsible for?

A: Yes. An increase in salary would increase the amount of payroll tax – specifically an increase in the Medicare withholding tax – for which the business is responsible. However, the increase would be insignificant – probably less than $3,000 – and would not change any conclusions reached from the projected UCA cash flow statement.

Course overview: Management Assessment, Projected Cash Flow, and the First Way Out