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| 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. |
sea.m.
finance.xls
