# Finance Homework2 – Attn: Prof-Hayat

This is for Prof-Hayat to work on. ðŸ™‚

 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 longÃ¢â‚¬â€˜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.