Financi

alManagement
(
A.Fi
nanci
alPlanni
ng&Strat
egi
es)

MODULE 1
1 i
t:
A.reducestheri
skofcashshor t
age
FI
NANCI
ALMANAGEMENT B.will
havehigherinterestexpenses
C.improvestheleverager at
io
A.FI
NANCI
ALPLANNI
NGANDSTRATEGI
ES D.isi
gnoringtheprinci
pleofmat chedmat
uri
ti
es

THEORI ES: Short

-termfinancing
Businessplan 14.Thetypeofcompanymostl i
kel
ytoneedshor t
-ter
mf i
nanci
ngi
sonet
hat
3.Thet ypicalout
li
neofthecomponentpar
tsofabusinessplanwouldbet
he A.hasnoseasonal i
tyandnogrowthinsal
esfrom yeart
oyear
A.mi ssionandstr
ategyst
atement
s. C. f inanci
alproject
ions
. B.sellsonlyforcash
B.oper ati
onsofthebusi
ness. D.All
oftheabove. C.hasahi ghdegreeofseasonal
it
y
D.hasl owertotalf
ixedcost
sthantot
alvar
iabl
ecosts
Fi
nanci
alpl
anni ngprocess
2.Planni
ngf orfutur
egrowthiscal
l
ed: 25.
Commonsourcesofshor
t-t
ermf
inanci
ngi
ncl
ude:
A.capit
al budgeti
ng C.f
inanci
alfor
ecast
ing A.Stret
chi
ngpayabl
es C.Reducingi
nvent
ory
B.workingcapi t
almanagement D.noneoft heabove B.Issui
ngbonds D.All
oftheabove

1
. Thei
dealf
inancial
planningprocesswoul
dbe 24.
How does l ong-term f i
nancing pol i
cy af fect shor t
-ter
m f i
nancing
A.top-
downpl anning. requir
ement s?
B.bott
om- upplanning. A.The nat ure oft he fi
rm's short-
term f i
nancialpl anning problem is
C.acombi nati
onoft op-downandbott
om-uppl
anni
ng. determi nedbyt heamountofl ong-term capitali
traises.
D.noneoft heabove. B.Af i
rmt hatissueslargeamount sofl ong- t
erm debtorcommonst ock,
ort hatr etai
ns a large partofi ts earnings,may f ind thatithas
1
8.Whichoft hef ollowingisincorr
ectr egardingtheconstruct
ionoffinancial permanentexcesscash.Ot herf i
rmsr aiser elati
velylit
tl
el ong-t
erm
pl
anningmodel s? capitalandendupasper manentshor t-
term debt ors.
A.Ther eisnot heoryormodelt hatleadsstrai
ghtt ot
heopt i
malfinancial C.Mostf i
rmsat temptt ofindagol denmeanbyf inancingallfi
xedasset s
st
rategy. andpar tofcur rentassetswithequi t
yandl ong-term debt.Suchf ir
ms
B.Financialplanni ngshouldnotpr oceedbyt ri
alanderror. mayi nvestcashsur pl
usesdur i
ngpar toft heyearandbor row during
C.Many di ff
er ent str
ategies may be pr ojected under a range of therestoft heyear.
assumpt i
onsaboutt hef utur
ebef oreonest r
ategyisfi
nall
ychosen. D.Al loftheaboveaf f
ectshort
- t
ermf i
nancing.
D.Thedozensofsepar ateproject
ionsthatmaybemadedur i
ngthistr
ial-
and-errorprocessgener ateaheavyl oadofarithmet
icandpaper work. Judgment al approach
21.Undert hej udgment alappr
oachfordevel
opingaproformabalancesheet
,
Fi
nanci
ngpoli
cy the “plug”f i
gurer equir
ed to br
ing t
he st
atementi
nto bal
ance maybe
Matur
it
iesmatchi
ng cal
ledt he
23.Whenafi
rmf i
nancesl
ong-
ter
m asset
swi
thshor
t-t
erm sour
cesoff
undi
ng, A.r etainedear ni
ngs C.suspenseaccount

61
7
 Financi
alManagement
(
A.Fi
nanci
alPlanni
ng&Strat
egi
es)

B.account
srecei
vabl
e D.r
equi
rednewf
inanci
ng B.Fundsthatafi
rm mustrai
seex ternal
l
yt hr
oughbor
rowi
ngorbys el
l
ing
newcommonorpr efer
redstock.
Per
centofsal esmethod C.Theamountofasset
srequi
redperpes oofs al
es.
6.Theper centofsal
esmet hodisbasedonwhi chofthefoll
owi
ngas
sumpt
i
ons
? D.Aforecast
i
ngapproachinwhi chtheforecast
edper
cent
ageofs
alesfor
A.All balancesheetaccount
sar et
ieddirectl
ytosales. eachit
em i
shel
dcons t
ant
.
B.Mos tbalancesheetaccountsareti
eddi r
ectl
ytos al
es.
C.Ther ei sconsi
derabl
yexcessi
veas setl
evel. 8.Which oft he foll
owing st atementsaboutf orecasti
ng exter
nalfundi
ng
D.St atement saandcabovear ecorrect. requir
ement svi
at heper centageofsalesmet hodi str
ue?
A.Thepl anassumest hatsal esar
edet erminedbyasset st
hatdetermi
ne
4.Whichoft hefol
l
owi
ngi st
hemajorindependentvari
abl
einconst
ruct
ing theexternalf
undsneeded.
pr
of or
mai ncomest
atement
sandbalancesheets? B.Thepl anassumest hattheexternalfundsneededi mpactassetswhi
ch
A.totalasset
s C.dividendpayout intur
ndr i
vesal es.
B.netincome D.sales C.The pl an assumest hatsalesdet ermine assetst hatdeter
mine t
he
exter
nal f
undingneeded.
7.Thef
ir
ststepindevelopi
ngapr ofor
maincomestat
ementi
sto: D.Thepl anassumest hatthereisavar yi
ngr elati
onshipbetweensales,
A.buil
dasal esf
orecast C.deter
minet
hecostofgoodssol
d assets,andfundsneeded.
B.determinetheproduct
ionschedul
e D. noneoftheabove
1
1.Which of t he fol
lowing best descri
bes a f ir
m' s ext ernal f
undi
ng
20.
The per cent
-of
-sal
es method of pr
epari
ng the pr
oject
ed i
ncome requir
ement?
stat
ementassumesthatal
lcost
sar
e: A.Gr owt hi
nassetsminusgrowthinl
iabi
li
ti
esminusneti ncome
A.Const ant C.Var
iabl
e B.Gr owt hi
nassetsminusthecurr
entyear'
sretainedear nings
B.Fi xed D.I
ndependent C.Gr owt hi
nassetsminusgrowthincurr
entli
abil
iti
esmi nusneti ncome
D.Gr owt hi
nasset sminusgrowthincur r
entliabil
it
iesmi nustheyear'
s
22.
Uti
li
zi
ng pastcostandexpenser at
ios( percent
-of-salesmethod)when retai
nedearni
ngs
prepari
ngpr oformaf inancial statement swil
ltendto
A.Under state pr
of i
tswhen sal esar e decreasi
ng and overstat
e pr
ofit
s 1
5.Acompanyt hathasrapi
dlygr
owingsal
eswil
lpr
obabl
y
whensal esareincr easing. A.needaddi t
ional
long-
termfi
nanci
ngC. have i ncr
easi
ng asset
B.Under stateprofit
s,nomat terwhatt hechangei nsales,asl
ongasfixed requi
rement s
costsarepresent . B.haveafinancinggap D.findt
hatal
loft
heabovear
etr
ue
C.Under state profi
tswhen sal esar ei ncreasi
ng and overstat
e pr
ofit
s
whensal esaredecr easing. 1
7.Whi
chofthefoll
owings t
atement sismos tcor
rect?
D.Over stat
epr ofi
ts,nomat t
erwhatt hechangei nsal es,asl
ongasfixed A.Sinceaccountspayableandaccr uedli
abi
li
ti
esmus teventuall
ybepai d,
costsarepresent . astheseaccountsincr
eas e,requir
ednewf inancingalsoincreases.
B.Supposeaf i
rmi soper at
i
ngi tsfixedassetsbelow 100per centcapaci ty
Addit
ionalfundsneeded butisat100per centwi t
hr espectt ocurr
entas set
s.I fsalesgr ow,the
5.Addi t
ionalf
undsneededarebestdefi
nedas: fi
rm canoffsettheneededi ncreaseincurrentas s
etswi t
hi tsidlef
ixed
A.Fundst hatar
eobtai
nedaut
omat i
cal
lyf
rom r
out
i
nebus
ines
str
ans
act
i
ons
. asset
scapacity.

61
8
 Financi
alManagement
(
A.Fi
nanci
alPlanni
ng&Strat
egi
es)

C.I
faf i
rmr etainsallofi
t
sear ni
ngs,thenitwil
lnotneedanyaddit
i
onal f
unds unchanged,whi choft hef oll
owi
ngf act
or sisli
kel
ytoincreasei
tsaddi
ti
onal
tosupports alesgrowth. fi
nancingr
equi r
ement?
D.Addit
ionalf undsneededar etypi
call
yr ai
sedfrom somecombi nat
ionof A.As har
pi ncreaseinitsf or
ecast
eds alesandt hecompany’
notespayabl e,long-t
erm bonds ,andcommons tock.Theseaccounts areatful
lcapacit
y.
arenons pont aneousinthattheyrequir
eanex pl
i
citfi
nanci
ngdecis
ionto B.Ar educti
oni nit
sdividendpayoutr at
i
o.
i
ncreaset hem. C.Thecompanyi ncr
eas esit
srel
i
anceont radecredi
tthatshar
plyr
ais
esit
s
accountspayable.
Growth D.Anewcos tcontr
olpr oducesmoreef fi
cientcost
s.
19.Whichoft hef oll
owi ngi si ncor r
ectr egardi
ngt heef fectofgr owt
hont he
needf orexternalfinanci ng? 1
3.Whichoft hefol
l
owingwillnotper
mi tahi
gherint
ernalgr
owthrat
e,ot
her
A.Hi ghergr owt hr ateswi l
lleadt oagr eaterneedf ori nvestmentsinfixed t
hingsequal?
assetsandwor kingcapi t
al. A.Ahi gherpl
owbackrati
o C.Ahigherret
urnonequit
y
B.Thei nt
ernal growt hr ateist hemaxi mum r atethatt hef i
rm cangrowi fit B.Ahi gherdebt
-to-
assetrat
io D.Ahigherret
urnonasset
s
rel
iesent i
relyonr einvest edpr ofit
stof i
nancei tsgr owth,thatis,the
maximum r ateofgr owt hwi thoutrequiri
ngext er
nal f
inancing. Sustai
nabl
egr owthrate
C.Thesust ainablegr owt hrat eisther at
eatwhi cht hef irm cangrow wi t
h 16.Thesustainablegrowt hrateisbestdescribedbywhichoft hefol
lowing?
theoptionoff lexiblychangi ngi t
sleverageratio. A.Ther ateofsal esgr owththatwil
lsustaint
heassetsofthecompany.
D.Onever ysimpl est artingpoi ntmaybeaper centageofsal esmodeli n B. Ther ateofear ningsgrowthneededt oavoi
dexternal
financing.
whichmanykeyvar iablesar eassumedt obedi rectlyproport
ionalto C.The maxi mum r ate ofsalesgrowt h ofa company wi thoutusing
sal
es. ext
ernal debt.
D.The maxi mum r ate ofsalesgr owth ofa companywi thoutraisi
ng
Sensi
ti
vi
tyanalysis ext
ernal fundsfrom the sal
eofst ock.
9.Holdingallothervari
ablesconst
ant
,whichofthef ol
l
owingwoul dincr
ease
afi
rm'sexternalf
undingrequi
rementsi
ntheplanningperiod?
A.Ani ncr
easei nassets C.Ani ncreaseindividendspai
d PPROBLEMS:
B.Adecr easeinaccr ual
s D.Al l
oftheabove Per
cent -of-sal
esmet hod
Tot
al assetsrequir
ement s
1
0.Whi
chofthefoll
owingisli
kelytoincr
easether equi
rednew f
inanci
ng(RNF) i
. Lamphaspr ojectedsal
esofP100, 000,agr ossprof
itmar
ginof45%,a
i
nagivenyear
? retur
nonsal esof1 5%.Accountsreceivabl
ehasbeen25% ofsaleswhil
e
A.Thecompanyr educesit
sdivi
dendpayoutr ati
o. i
nvent oryhasbeen 1 0% ofcostofsal es. Lamp hasminimum cash
B.Thecompany’ . balanceofP1 0,000andf i
xedassetsar eproj
ectedtobeP75,000.Total
C.Thecompanydeci destor educeitsr
eli
anceonaccount spayableasa assetsrequir
ement swoul
dbe
for
m offi
nanci
ng. A.P 40, 500 C.P1 1
5,500
D.Thecompanyi soperat
i
ngwel lbel
owfullcapacit
y. B.P240, 000 D.P270, 000

1
2.MonumentCorpor
ati
onhasdevel
opedafor
ecast
ingmodelt
odeter
minet
he Addi
ti
onalFinanci
ngNeeded
addi
t
ionalf
undsitneedsinthe comi
ng year
. Otherfact
orsremai
ni
ng Tot
alasset
s

61
9
 Financi
alManagement
(
A.Fi
nanci
alPlanni
ng&Strat
egi
es)

i
i
. Calculatet he totalassets ofPremi ere Company gi ven the foll
owing muchshoul
dberai
sedi
next
ernal
funds
?
i
nformat ion: A.P 200,000 C.P 800,
000
Salest hisyear P3,000,000 B.P 600,000 D.P1,
200,
000
Salesi ncreaseproj
ectedfornextyear 20percent
Neti ncomet hisyear P 250, 000 v. PatioCompanyr ecentl
yr eportedsal esofP1 00mi ll
ion,andneti ncome
Dividendpayoutr ati
o 40percent equaltoP5mi l
li
on.ThecompanyhasP70mi l
li
onint otalassets.Overt he
Projectedex cessfundsavail
abl
enex tyear P 1 00,000 nextyear ,t
hecompanyi sf orecasting a20 per centi ncreasei nsales.
Account spayabl
e P 600, 000 Since the company i s atf ullcapaci t
y,i ts assets musti ncrease in
Not espayabl e P 1 00,000 proporti
ontosales.Thecompanyal soest i
mat est hatifsalesincrease20
Accr uedwagesandt axes P 200, 000 percent,spontaneous liabili
ti
es wi l
li ncrease by P2 mi l
li
on. I ft he
Exceptf ortheaccountsnoted,ther
ewer enoot hercur
rentli
abil
i
ti
es.As sume company’ ,i t
spr of
itmar ginwi llremainati tscurrentlevel
.
t
hatt he f i
rm’ Thecompany’ . Basedont heRNF
operati
ngatf ul
lcapaci
ty. formula,how muchaddi ti
onalcapi talmustt hecompanyr aiseinor derto
A.P3, 000, 000 C.P2, 000,
000 supportthe20per centi
ncr easeinsal es?
B.P2, 200, 000 D.P1 ,
200,000 A.P2, 000,
000 C.P8, 400,000
B.P6, 000,
000 D.P9, 600,000
Addi ti
ont oretai
nedear nings
i
i
i.AlmondCor por
ationrecent lyr epor
tedt hef oll
owingi ncomes tatementf or vi
.LeverageCompany’ ,2006bal
ancesheet(
inP’ ,
000)i
s
2006( i
nP’ ) : gi
venbelow:
Sales P7, 000 Cash P1 0 Account spayabl e P15
Oper ati
ngcos ts 3,000
Account
srecei
vabl
e 25 Not espayabl e 20
EBIT P4, 000
I
nventor
ies 40 Accr uedexpenses 15
Int
er est 200
Long- t
er m debt 30
Earningsbef oretaxes(EBT) P3, 800
Taxes( 40%) 1 ,
520 Netf i
xedassets 75 Commonst ock 70
Neti ncomet ocommonshar eholders P2, 280 Totalassets P150 Tot alLiab&equi t
y P150
Thecompanyf orecaststhati t
ss al
eswi l
lincreaseby1 0percentin2007and Salesduri
ngt hepastyearwer eP100,000,000andt heyareex pectedtor is
e
i
tsoper ati
ngcos tswill
increas einpropor t
iont osal
es .Thecompany’ by50per centtoP1 50,000,000dur i
ng2007. Al s o,duri
ngl astyearfixed
ex pensei sex pectedtor emai natP200, 000,andt het axr
atewi l
lr emai
nat assetswer e being ut
il
i
zed t o onl
y85 per centofcapaci ty,s o Leverage
40per cent.Thecompanypl anst opayout50per centofi tsnetincomeas Companycoul dhavesuppor tedP1 00,000,
000ofs aleswit
hf i
xedas set
st hat
wer e onl
y 85 percentofl astyear ’ . As s
ume t hat
dividends ,theother50per centwi l
lbeaddi ti
onstor etai
nedearnings .Whatis
Leverage’
thef or
ecas t
edaddi t
iontor etainedearningsfor2007?
companywi l
lconti
nuet opayout60per centofi tsear ni
ngsasdi vi
dends .
A.P1 ,140 C.P1 ,
440
Whatamountofnons pontaneous ,requir
ed new f inanci
ng (RNF) ,wil
lbe
B.P1 ,260 D.P1 ,
790
neededdur i
ngt henextyear?
A.P55, 500,000 C.P49, 500,000
Addit
ionalf
inanci
ngneeded B.P52, 500,000 D.P40, 125,
000
i
v.Ifaf i
rm usesext
ernal
financi
ngasaplugit
em,hasanewcapit
albudgetof
P2mi l
li
on,anetincomeofP3mi l
l
ion,andaplowbackr
ati
oof40%,how

620
 Financi
alManagement
(
A.Fi
nanci
alPlanni
ng&Strat
egi
es)

vi
i
.Spar kCompanyhaspl ant
si n3maj orcit
ies. Salesforlastyearwere anddividendsofP60, 000.Thecompanyant ici
patesitss al
eswi l
lincrease
P100mil
li
on,andthebalancesheetatyear- endissimil
arinpercent
age 20 percenti n 2007 and i t
sdi vi
dend payoutwi l
lremai n at60 per cent
.
ofsal
estothatofpr
evi
ousyear s(
andthiswi l
lconti
nueinthefutur
e).All Assumet hecompanyi satf ullcapacit
y,soi t
sas setsand s pont aneous
asset
s(i
ncl
udingfi
xedassets)andcurr
entliabil
i
ti
eswi l
lvar
ydirect
lywit
h l
iabi
li
t
ieswi l
li
ncreasepropor t
ionatel
ywithanincreas
eins ales.
sal
es.SparkCompanyisalr
eadyusingasset satful
lcapaci
ty. Assumet hecompanyus est heAFNf ormulaandalladditional f
undsneeded
(AFN)wi l
lcomef r
om issuingnew l ong-t
erm debt.Gi veni t
sforecas t
,how
muchl ong-ter
m debtwillthecompanyhavet oissuein2007?
Bal
anceSheet
A.P 60, 000 C.P 92, 000
(
Inmill
i
onpesos)
B.P 88, 000 D.P1 12,
000
Asset
s Liabil
i
ti
esandStockhol
ders’
Accountspayableandaccrual
sP25 Maximum sales
Cur
rentasset
s P50 Not espayabl
e–longterm 30 i
x.IndoIndus tri
eshasP2. 5mil
l
ioninsal
esandP0. 8mi l
l
ioninfi
xedassets
.
Commonst ock 15 Current
ly,thecompany’ .
Fi
xedasset
s 40 Ret ainedearni
ngs 20 Whatl evelofs al
escouldIndo I
ndus
tri
eshave obtai
ned i
fithad been
operati
ngatf ul
lcapaci
t
y?
Total P90 Tot al P90 A.P2, 800, 000 C.P3,000,000
Spark Company has an after-t
ax profi
tmar gi
n of5 percentand a B.P3, 333, 333 D.P3,125,
575
divi
dendpayoutrati
oof30per cent.
I
fsalesgrow by1 0percentnextyear,therequir
ednew f
inanci
ng( RNF) Maximum gr owthrate
tofi
nancetheexpansionis x. PierreCompanyhast hef ol
lowingrati
os:A* /S=1 .
6;L*/S=0. 4;profi
t
A.P4, 850,
000 C.P2, 650,000 mar gin=0.10;anddividendpayoutratio=0.45,or45percent.Salesl
ast
B.P3, 000,
000 D.P5, 000,000 yearwer eP1 00mi l
l
ion.Assumi ngthattheserati
oswil
lremainconstant
andt hatal
ll
iabi
li
ti
esincreasespontaneouslywit
hincr
easesinsales,what
NewLong- ter
m debt i
st hemaximum gr owt hrat
ePi ereCompanycanachi evewithouthavi
ng
vi
i
i.Hel
l
oCompanyhast hef
oll
owi
ngbal
ances
heetasofDecember31,2006. toempl oynonspontaneousexternalfunds?
Currentasset
s A.3. 9percent C.7.8percent
P 600, 000 B.4. 8percent D.9.6percent
Fix
edas set
s 400,000
TotalAss
ets P1
,000,000 x
i.TheRi pleyCompanyi st r
yingt odeter mineanaccept ablegrowt hratein
sales
.Whi l
et hefir
m want stoex pand,itdoesnotwantt ous eanyex ter
nal
Account spayable P 100,
000 fundstos upportsuchex pansionduet ot hepart
icul
arl
yhighinterestr
atesin
Accruedl iabi
li
t
ies 100,
000 themar ketnow.Havi nggat heredthef oll
owingdataforthefir
m,whati sthe
Notespayabl e 100,
000 max i
mum gr owt hrateitcans ustai
nwithoutrequi
ringadditi
onalfunds?
Long- term debt 300,
000  Capi tali
ntensit
yrat i
o=1 .2.
Totalcommonequi t
y 400,
000  Pr ofi
tmar gin=1 0%.
Total Li
abili
ti
esandEqui
ty P1,
000,000  Di vi
dendpayoutr ati
o=50%.
I
n2006,t hecompanyr epor
tedsal
esofP5mi
l
li
on,neti
ncomeofP1 00,
000,  Cur rentsales=P1 00,000.

621
 Financi
alManagement
(
A.Fi
nanci
alPlanni
ng&Strat
egi
es)

 Spont
aneousl
i
abi
l
it
ies=P1
0,000. curr
ent assets wi
th l
ong-term fi
nanci
ng and rest wi
th shor
t-t
erm
A.3.
6% C.5.
2% fi
nancing,whati
sthel
eveloflong-
termfi
nanci
ng?
B.4.
8% D.6.
1% A.P 68, 000 C.P150,
000
B.P1 00,000 D.P155,
625
Maximum dividendpayoutr ati
o
xi
i
.Whati st hemaxi mum di vi
dendpayoutrat
ioconsi
stentwithnotrequi
ri
ng
ext
ernalfundsf orafir
m wi t
hanROEof1 5%,adebt -equi
tyr
ati
oof50%,
andanannual salesgrowt hobj
ect
iveof9%? i
. Answer
:C
A.Appr oximately1% C.Appr oxi
mately12% Cash
B.Appr oximately10% D.Appr oxi
mately20% P1
0,000
Account
srecei
vabl
e(0.
25xP1
00,
000)
Fi
nancingPol icy 25,
000
Conservat i
vepol icy I
nvent
ory (
0.1xP1
00,
000x0.
55)
xi
i
i.WalesCompanyhasP8, 000,000i ncur r
entassets,P3,500,000ofwhi ch 5,
500
are consi dered permanentcur rentasset s. In addi
ti
on,t he f
ir
m has Fi
xedasset
s
P6,000, 000i nvestedi
nf ixedasset s.Wal esCompanywi shestofinance 75,
000
al
lfixedasset sandper manentcur rentassetsplushalfofitstempor ary Tot
alasset
srequi
red
curr
entasset swi t
hlong- ter
mf inancingcost i
ng1 5percent.Shor t
-term P1
15,
500
fi
nanci ngcur rentl
ycost
s1 0per cent.Wal esCompany’
i
nterestandt axesareP2,200, 000.I ncomet axrateis40percent. i
i
. Answer:D
How much woul d Wales Company’ Thenotepayabl eisassumedtobeanonspontaneousl
i
abil
i
ty.
fi
nanci ngpl an? LetA=Tot alAssets
A.P21 2,500 C.P225, 000 0.2A–(800, 000x0. 2)–(
3,000,000x1 .
2x0.
0833x0.6)= -1
00,
000)
B.P1 27,500 D.P 85, 000 0.2A–1 60,000–1 80,000 =-100,000
0.2A = 240,000
Aggressivepolicy A =1 ,200,000
xi
v.Lumi nousCo.hastot
alfi
xedassetsofP1 00,
000andnocur rentli
abi
li
ties.
Thet ablebelowdi
spl
aysitswidevar
iati
onincur
rentassetcomponent s. i
i
i.Answer :B
1stQt
r 2ndQt r 3rdQtr 4thQtr Salesforecast(P7M x1 .
1) P7,
700,
000
Cash P 20, 000 P 1 0,
000 P P Oper at
ingcosts(P3M x1 .
1) 3,
300,
000
15,000 20,000 EBIT P4,
400,
000
Acct s 66,000 25,
000 47,000 88,000 I
nterest 200,
000
receivable Earningsbeforetax P4,
200,
000
I
nvent ory 20,000 65,
000 59, 000 1 0,
000 I
ncomet axP4, 200,000x0.4) 1,
680,
000
Total P106,000 P100,000 P1 21,000 P11 8,
000 Netincome P2,
520,
000
Divi
dends( P2,520,000x0.5( 1,
260,
000
I
fLumi nous’

622
 Financi
alManagement
(
A.Fi
nanci
alPlanni
ng&Strat
egi
es)

I
ncr
easei
nRet
ainedEar
nings P1
,260,
000 SL=Spontaneous(
var
iabl
e)l
i
abi
l
it
ies
RE=Retai
nedearni
ngs
i
v.Answer:C ∆S=Incr
easeinsal
es
Capit
albudget 2,
000,
000
I
ncreaseinret
ainedear
nings(
3M x0.
4) 1,
200,
000 vi
i
i.Answer:D
Ext
ernalf
undsneeded 800,
000 I
ncreasei
ntotal
assets (1M x0.2) 200,000
I
ncreasei
nli
abil
it
ies (200,000x0.
2) 40,
000
v. Answer:C I
ncreasei
nnetspontaneousasset s 160,
000
Addit
ionalasset
s( 70M 0.
2) 14,
000,000 I
ncreasei
nretai
nedearnings (
6M x0.
02x0. 4)
Deduct : 48,
000
I
ncreaseinspontaneousliabi
l
it
ies 2,000,
000 I
ncreasei
nlong-ter
m debt(RNF) 1
12,
000
I
ncreaseinretai
nedearnings( 120M x0.05x0.6)3,
600,000
5,
600, 000 i
x.Answer:B
Addit
ionalcapit
al 8,
400,000 Amountsal
espercapaci
tyunit(
2.5M ÷75) 23,
333.
33
Amountofsal
esat100% capaci
ty: 1
00x33,
333.
33
vi
.Answer :D 3,
333,
333
Fixedr equir
edbyP1 00M sal
es(P75M x0.85) P63,750,000
Total f
ixedassetsrequir
edbyP1 50M sal
es( 1
50÷1 00xP63, 750,000) x. Answer:B
P95, 625,000 1.
6(X–100, 000,000)–0. 4(X–100,000,
000)–(0.
55x0.
10X)=0
Deductcur r
entleveloffi
xedassets 75,000,000 1.
2(X–100, 000,000)–0. 055X =0
Requi redincreaseinfi
xedassets 20,625,000 1.
2X -120,000, 000 -0.055X =-
Increaseinnetspont aneousassets 0.5x(P75M –P30)22,500,000 1.
145X =120,000, 000
Total f
inancingneeded 43,125,000 X=1 04,803,493
Deducti ncreaseinretai
nedearnings (
P150M x0.05x0.4) Growt
h:( 1
04, 803,493/
100,000,000)–1= 4.8%
3,000, 000
Addi t
ionalFinanci
ngNeeded P40,125,000 xi
.Answer :B
Thesolutionmayuset heRNFf or
mula.
vi
i
.Answer :C [g(
A*–L* )
]–(RRxROSxS1 )
RNF= ( SA/S0x∆S)–(SL/ S0x∆S)-∆RE *Refert ospontaneousorvar i
abl
eassetsandli
abi
l
iti
es.
(0.90x1 0M)–(. 25x10M)–( .
70x.05x110M) Totalassetsbasedoni ntensit
yrat
io:(
100,000x1.2) P1
20,
000
6,500,000–3, 850,
000=2,650,
000 0=g( 1 20,000–1 0,000)–[ 0.1x0.5x100,000x(1+g)
]
Alt
ernativeSol
uti
on: 0=1 1
0, 000g– 5, 000x( 1+g)
RNF=( 0.1x90M)–( 0.
1x25M)–(0.7x0.
05x110M)
=2,
650,
000 0=1 1
0, 000g– 5, 000+5, 000g
105,000g=5, 000
SA=Spont
aneous(
var
iabl
e)asset
s g 4.8%

623
 Financi
alManagement
(
A.Fi
nanci
alPlanni
ng&Strat
egi
es)

xi
i
.Answer:B
Equi
tyr
ati
o:1÷(1+0.
5) 66.67%
0 =0.09–(0.
15x0.
6667xRR)
0 =(0.09–0.
1RR
0.
1RR = 0.09
RR = 90%

xi
i
i.Answer:B
Long-termfi
nanci
ng (11.75M x0.
15 1
,762,
500
Shor
t- t
ermfi
nanci
ng (
2.25M x0.1
0) 225,
000
I
nter
estcosts 1
,987,
500
Aft
ertaxincome: (
2,200,000–1,987.
000).
60 127,
500

FinancingMix:
Fixedassets 6.00M
Permanentlevelofcur
rentasset
s 3.50M
Tempor ar
ylevelofcur
rentasset
s (
0.5x4.
5M) 2.25M
TotalLong-t
erm Fi
nancing 1
1.75M

xi
v.Answer:C
Fi
xedassets 100,000
Permanentcur
rentassets(100,
000x0.5) 50,000
Tot
alPermanentFinanci
ng 150,000
Permanentcurr
entassetsrepr
esentthel
owestl
evel
ofcur
rentassets
duri
ngtheyear.

624