NAME: Garde, Lovelen E. SECTION: BSBA FM 1-B DATE: Oct.

4, 2022

Module 3 – Financial Forecasting

Activity 3 – Self Test Exercises

A. Multiple Choice
1. A
2. C
3. A
4. B
5. A
6. D
7. B
8. A
9. A
10. D

C. Case Problem 3.1

Question:
1. Will external financing be required for the company during the coming year?

AFN
= Projected Increase in Assets - Spontaneous Increase in Liabilities - Any Increase in Retained Earnings
= 0.80 (45,000,000) - 0.45 (10,000,000) - 0.8 (345,000,000) (0.75)
= 36,000,000 - 18,000,000 - 20,700,000 RNF = (2,700,000)
= -2,700,000

A negative figure for the new funds required indicates that the new investment will have an
excess of funds which is P2,700,000. Therefore, no external funds are needed.

2. What would be the need for external financing if the net profit margin went up to
9.5 percent and the dividend payout ratio was increased to 50 percent? Explain.

AFN
= Projected Increase in Assets - Spontaneous Increase in Liabilities - Any Increase in Retained Earnings
= 36,000,000 - 18,000,000 - 0.095 (345,000,000) x (1 - .5)
= 36,000 - 18,000,000 - 19,387,500
= 1,612,500

The net profit margin increased slightly, from 8% to 9%, which decreases the need for external
funding.