Finance Homework2 - Attn: Prof-Hayat

sea.m.

Main

Home >Homework Answsers >Business & Finance homework help

This is for Prof-Hayat to work on. :)


A firm with sales of $5,000 has the following balance sheet:

Assets, Liabilities and Equity as of xx/xx/xx
Assets		Liabilities and Equity
Accounts receivable	$1,300	Accounts payable	$1,200
Inventory	1,600	Long-term debt	2,500
Plant	1,700	Equity	900
Total	$4,600	Total	$4,600

The firm earns 20 percent on sales and expects those sales to rise to $5,500. The increased sales may
require additional financing. Accounts receivable and inventory will increase, and trade accounts will
also spontaneously increase with the increase in sales. Management expects to distribute 75% of earnings.

a. Determine the new balance sheet entries for those assets and liabilities that spontaneously change with thesuch as 22% or .22.
level of sales using the percent of sales technique. (Accounts receivable, inventory, and accounts payable vary with sales; the
other entries do not). Round off to nearest percentage point,

b. Will the firm need external financing to achieve sales of $5,500?

c. Construct the pro forma balance sheet for sales of $5,500. Any new financing should be obtained by issuing new long‑term
debt. Any excess funds should be held in cash.

Given the following information:
Sales
June	$200,000
July	200,000
August	200,000
September	300,000
October	500,000
November	200,000

- 2. 70% of the sales are for credit and are collected one month after the sale. Other receipts: $50,000 in October
- Variable disbursements: 60% of sales each month
- Other disbursements: $10,000 a month
- $80,000 for taxes in August
- $400,000 for debt repayment in November
- Beginning cash: $50,000
- Desired cash: $10,000

Prepare a monthly cash budget for this firm.