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Chapter 14 - Answer
Chapter 14 - Answer
CHAPTER 14
FINANCIAL FORECASTING
I. Questions
1. The pro-forma financial statements and cash budget enable the firm to
determine its future level of asset needs and the associated financing that
will be required. Furthermore, one can track actual events against the
projections. Bankers and other lenders also use these financial statements
as a guide in credit decisions.
3. Rapid growth in sales and profits is often associated with rapid growth in
asset commitment. A P100,000 increase in sales may occasion a P50,000
increase in assets, with perhaps only P10,000 of the new financing coming
from profits. It is very seldom that incremental profits from sales
expansion can meet new financing needs.
1. C 6. B 11. D 16. B
2. A 7. A 12. C 17. A
3. C 8. C 13. B 18. A
4. A 9. B 14. C 19. D
5. A 10. A 15. A
III. Problems
14-1
Chapter 14 Financial Forecasting
Cash Budget
June July August September
Cash Receipts....................................... P311,900 P293,000 P276,500 P283,200
Cash Payments..................................... 270,500 159,500 185,000 588,000
Net Cash Flow....................................... 41,400 133,500 91,500 (304,800)
Beginning Cash Balance........................ 20,000 50,000 50,000 50,000
Cumulative Cash Balance...................... 61,400 183,500 141,500 (254,800)
Monthly Borrowing or (Repayment)........ -- -- -- *28,400
Cumulative Loan Balance....................... -- -- -- 28,400
Marketable Securities Purchased........... 11,400 133,500 91,500
(Sold) -- -- (236,400)
Cumulative Marketable Securities.......... 11,400 144,900 236,400
Ending Cash Balance............................ 50,000 50,000 50,000 10,000
14-2
Financial Forecasting Chapter 14
S = P10,000,000 A L
S S
RNF (millions) = (P10,000,000) (P10,000,000) .07
(P110,000,000) (1 .40)
RNF = P1,380,000
RNF = (P2,700,000)
14-3
Chapter 14 Financial Forecasting
A negative figure for required new funds indicates that an excess of funds
(P2.7 mil.) is available for new investment. No external funds are needed.
14-4