AEC6 Financial Management

BSA2A
FINANCIAL PLAN ACTIVITY

Name: _____________________________________________ Date: _____________

Direction: Answer the following problems and show your solutions.

Problem 1

G Company has the following information:

Month Budgeted Sales

March 50,000.00
April 53,000.00
May 51,000.00
June 54,500.00
July 52,500.00

In addition, the gross profit rate is 40% and the desired inventory level is 30% of next month’s cost of sales.

1. What is the purchase budget for April?

2. What is the budgeted ending inventory for May?
3. What is the budgeted ending inventory for June?

Problem 2

At year-end 2021, total assets for Geneva Corporation were P1.2 million and accounts payable were 375,000. Sales,
which in 2021 were P2.5 million, are expected to increase by 25% in 2022. Total assets and accounts payable are
proportional to sales and that relationship will be maintained. Geneva typically uses no current liabilities other than
accounts payable. Common stock amounted to P425,000 in 2021 and retained earnings were P295,000. Geneva plans
to sell new common stock in the amount of P75,000. The firm’s profit margin on sales is 6%; 40% of earnings will be
paid out as dividends.

1. What was Geneva’s total debt in 2021?

2. How much new, long-term debt financing will be needed in 2022?