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Financial Planning and Forecasting
Disbursements:
Payment of accounts payable $438,000 $504,000 $552,000
Wages and salaries 250,000 290,000 290,000
Excess of available cash over $60,000 ($35,500) $40,750
disbursements
* Purchases are estimated at 60% of next month’s sales.
** Payments are estimated to lag purchases by one month
5. Elmwood Manufacturing Company
Cash Budget Worksheet
First Quarter, 2017
December January February March April
Estimated Sales $4,600,000 $6,400,000 $11,200,000 $8,400,000
$7,000,000
(all on credit)
Estimated Receipts
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* 30% of next month’s estimated sales
** Payments lag purchases by one month
Cash Budget
First Quarter, 2017
December January February March April
Sales $4 ,600,000 $6 ,400,000 $11 ,200,000 $8 ,400,000 $7 ,000,000
Projected cash
Disbursements
Payments of A/P $1,920,000 $3,360,000 $2,520,000
Incremental cash loans needed
to maintain a balance of
$750,000 $1,695,000 $1,435,000 –
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6. Podrasky Corporation
Pro Forma Statement of Cash Flows
($ millions)
Cash Flows from Operating Activities:
Net income $80
Adjustments to reconcile net income to net cash provided
from operating activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities
Additional financing X
Repayments of long-term debt (10)
In this problem, the expected cash flows must equal zero. Therefore,
Therefore, the additional financing required is $108 million.
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Additional
Financing = [(A/S)(S) – (CL/S)(S)] – [EAT – D]
Needed
Pro Forma Balance Sheet as of Dec. 31, 2017
Assets Liabilities
Cash $300,000 Accounts Payable $900,000
Accounts Receivable 600,000 Notes Payable 1,000,000
The required investment in accounts receivable for the projected
sales increase, assuming a 60-day average collection period is
The increase in accounts receivable projected in Part a is
c. Pro forma current ratio = 1.6
The pro forma current liabilities before any additional ;nancing is
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maximum of:
could be in additional N/P. The remainder of the needed financing
8. Table 4-4 Example
Additional
Financing = [(A/S)(S) – (CL/S)S] – (EAT – D]
Needed
Additional
Additional
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Additional
9. Available funds before capital expansion
= EAT plus Tax Depreciation minus Dividends minus Increase in
current assets plus Increase in current liabilities minus Reduction
in long-term debt
Therefore, external financing required is $75 (capital expenditures)
10. Sales growth = 50 percent
Cash growth = +$2
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This amount overstates total financing needs because the problem does not
11. No recommended solution
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