en cota ta pace aan Oe sean 20000 sales in 2016 3) = Rs ons na roe ee Re 1000+ 20000 = R129009 Pd magn = 108 Retention ratio (RR) = 40% a. Additonal investment peed in assets 1 Aion to retained earings =? 4 Adon ortabedearings = MSiRR=010%R5 12099, rained es 049 © Aion funds needed (AF) wn (8) sri i -Gtman)®200-(Gan)* 29-090 ang ‘= Rs 98,000 - Rs 5,000 - Rs 4800 - = Rs 88,200 ! ‘Nepal Mining Corporation's 2017 balance sheets shown belo: Balance sheet as of Dec31, 2017 Ss laid oy RR Tana ya [Accounts receivable $2000)Notes payable i rahul Jfotlcunetases 1500} ob cure ables fet Bad ses ‘1500)Morgage bonds — fost | “hearse eat aie wi a © ist eee Cp Pee Pv capital intensity ratio ofthe firm o tie aon investment needed nat ang of adioal spontaneous abi wa amount abe ig nati what sat isthe ation to retaned eamings in 20.7 gat the atonal fends needed (APN) oa soli Givert ss proportional ase (A') = RA. 200500 pons atic (2) = 220 3m z = Rs 31,000 sales in 2017 (x) = RS. 250,000 forecasted soles in 2018) ~Rs. 250000 + 2500» 029 Rs 300000 Change in sales (85) =$1-S ‘= Rs 300,000 - Rs 250,000 = Rs. 50,000 Profit margin (M) = 007 Or7% Dividend payout ratio (DPR) = 65% Retention ratio (RR) =1-DPR * =(1-06) 035 a. Thecaptalinensiy aio ~(& : imme)“ by, Regured incense in asta = ($5, (Bs 200.000) , = AFR) Rs somo = Rs. 40000= np 7 Pa Peng oes rene eee . = ee 2 «Q) jose oe Rs 1000000 +00000- Rta < svommeainemaeininanis — =(E)as . a - (83100 a Ges) 2am gens AEN)? =R6am : “i : wwebaver fed (AFN) . 6 Adtnonstontipeeamins = MARRS, Nepal onsen al 007035 Rs. 240009 - (8) s- Gos voe =Ra7380 © Adktona funds needs (APN) Wena s-E)as-mexnns . $0000 - Re, 6,200 Rs,7350 a sn.a60 BIE Mie wp, Ne TS Sa ‘The Pasi Cent Company (PCO) ol asf the eat 2017 yg, D200 (40040 curren asets and Rs 600 fied soe) ang eS lines of Rs 20020. Long term debt, common tock and additions in capa forthe year 2017 were Rs 300000, Rs 400.000 and Re ane! spt} Sn 7 oe Re MOND wih spn troponin at tomes nas ee ste ecenpny hood ry aac Te pe te opin es 0 poe th ced san fe 28 The POC ns renton ate crag 2018. Determine PC's additional funds needed for 2018, * stn Gre Teta = 0.0 caval andes a Seles sti Ceres ie umn Leng tem dla = Re 0000 i ‘Comman stock = Rs 400,000 ; Additional r alld ncapl «R000 Ot ss) Rs 200900 Hreresein sales (As) = 20% of Rs 1,000,000 = Rs 4000 aman = (SSNS) ne sonn- pn) 40000830 eR 4g =n 0)000-ReBOO-REBLTD 9900 SMB Tos Corporation (CY balance Shee vena ow “Slance sheet of KEC forthe year ended Chatra 31,2073, ee 2 | "a : eae args {oatanes | zoel tabi | a sales 278 we Fe NAD which peeed wna ZA. Amie at KIC van openings bl apy es hee capcty of Utes Th prt arg othe coop a ceo nt whe expcied fo mala ot he ae fn 27 Toe ce ea faked pcan 2 What i adionl investment in net? 's Wt i snticad mount ef rpm Sec? ‘¢ What is addon to retained earnings for 2082 4. Whats adltonal ands needed fo 270 Selution Given: Assets proportional oases (At) = Rs. 70000 Spontaneous ails (2) = Rs,20000+ 5.30900 50,000 Sales in 2073 (&) = Rs. 200,000 yLe et shat 9 Stoo Be Pane Managemen Fomasted sales in 274(5) _ ~ RS 200,00 + (Rs 20.009, =R 241000, 2.30) Cangrin sls a9) =5-& (9) peas - Rs 200,000 ke com Prag) = 23007108 wl =) coon ea 2 Adinatinesmentinases’ = (Sas coe ae Re Z1000 1 Adtnnstnoutetsponancs andes = (Eas Tee, (Additions to retained exmings =MxERee, 0.10% 030% Re, 250.009 =Rs. 7,500, 1d Adtinal ands needed (AEN) Werave, B)as-(E)ss- manana, =e 0000 = Re. 15000-7400 cre isa ‘Alpha Corporations balance sheets given below: Balance shet forthe year ended December 31,208 apr Pig = ox wat 10 pecent which epee fo manta at he ele a sae Alpha Corporation mains reeton roo 0 pec in 2 rie ubion Wo rnned exnings or 336 1. ae formala method and determine the aional nds needed for 206, Suton ‘ses proportional oases (A*) Re. 50000 spontaneous liabilities (1) =, 20000+ Rs. 10000, = 30,000 Sales in 2015) = Rs. 200.000 Forecasted sales in 2006 (3) Rs 2000 + (Rs 207000 « 0.20) Rs 240000 Change nsiles (88) = 81-5 = Rs 240,000 - Rs 200000 = es 40000 Prot margin) = 010.0 10% Retention ratio (RR) = 0.40 a. Additions to retained earings = MRS, = 010 040s, 260000 =F 9400 b, Additional funds needed (AFN) Wehave, (2) as-(E)ss- wens fase. ee 8.00) pa, 000 - (a) Rs 4900 - R500 104000 Rs. 6,000 - Rs 9600, = Rs. 84400 “Thefollowing isthe blancs shect of BB Company. oat [ anor | — Rae “a a ST a Ce amcctie | ISD] Acre at oa tsi | Nos poyte at Par ent assets "Rs, 50,000 | Total ‘current [— Rx 20.000, Teste viot Whew TU Slo of Bsc Pranc erage, Nat feds | toutes ‘Ss 10 were Rs. 100000 thats expected to Re ain eee ae y uied ‘company ig ‘Wat the capil intensity rato ofthe company? snurgin of the company is 10 percent and the uinisin retention ratio of 30 percent. 1 tuts the ain investment need in ass? «Datei th ational amount of spottaheousracingy 4. Determine the ation o retained earings, . + wert irs pay way Giver: Assets proportional to assets (A) * Ra. 125,000 Sprites (= Rs. 700 R30 = Re 10900 ‘Sales in 2005 (&) = Rs. 100,000 Forecasted sales in 2006 (5) = Rs 125,000 lagen ses 4) =Rs 25000 ‘Profit margin (M) = 0.10 Or 10% ‘Retertion ratio (RR) = 030 4 Thecapt intensity ratio Teptnsacn at (8) 5 (RIB) song =R,31250 Fi as b © Spontaneous increase in abilities «(0900 | 2) a5 =Rs, ; ition oriedcamings =x RR ‘S. ™ f ; : $210x020%Re 25000» Regen sto Chapter 7: ancl Pring nd Forecariog 25, alfunds need (AEN) weer = ses a 31250-R4 2500-37 6.25000 ‘omprehensive “Answer Questions: conpsohensive Aner Quesions _. a vac corporat i of payable expected roportion 8 ron’ sales are expected to increase from Re5 million in 2019 to 2 or by 20 percent Its assets totaled Rs 3 milion atthe end ration’ is at full capacity, and its assets must grow in sales. At the end of 209, current isblities ane Rs 15 ey caiting of Rs 30000 of accounts payable, Rs 65000 of rts se Re $3000 of accrued liblites The after-tax profit margin ‘be 5 percent, and the forecasted retention rato 30 percent. ‘milion in 219, Corpor Fetes the corporations aditional funds needed forthe coming yer ‘Assume that corporation pays no dividends, Under this assumption Solution ‘shat would be the additional funds needed for the coming. year, ‘esuming all other numbers are the same Why the foeasededitonl foris is differen from all one you found in (a) above Give! Sales i219) * Re Smilon ‘ales in 202) =Re.6 milion Rs. Smilin + 20% of Sion) Incremental sl (4S) = 204 of RS mion BCs =RAG-RS Remon Tot assets # Rs 3 ilion ‘Current iailites (Total) = Rs. 15 milion Account payable = Re, 50000 [Notes payable» Rs. 650.00 Accrued labs * Re 5000seen Sen De a ag, reat margin 0 5.0% 08 crc AK) = 3, 020 | Aboard edd (AF) =? Wersve ABN» (7/5) 5-2/5) 88- MRRY | Do a ee = (0 Rs 1000.0) (017 (Rs. 1.00.00) - (Rs, 30,000 (130) hs cn -R 1700-0 3 Net income =n. sammo ident 8) ae Dw cen j ‘Addon o R/E(3) Ger 4, sles lnrese by T-pecent over 2 sales and Ha 212 IS wi docrease to Rs. 16245, Prepare the pro forma franc statement using the projected financial satement method, Use AFN to tlanc the pro forma balance sheet. How much adeition€l capital willbe required? ‘Assume the firm operated at fll capacity in 201, yi the profit margin were to remain at 6% and the dividend payout rate ‘were to remain at 0%, at what growth rate sales would the additional financing requirements exaclly 210? solution 2 Calelationf AFN using proforma balanct sheet Fit prepare proforma income statement in 2012 “Total assets = Rs 3 milion / AEN = (A*/Ss) AS (L*/S) AS - M5y(RR). “(EEE msm (8 = (0.60) Rs. 1,000,000) - (0.17) (Rs. 1,000,000) ~ (Rs. 300,000) (1) Rs. 600000 Rs.170000-Rs 000m | = RS13000 ? can Sey mt a sree pS “aes Rs 720000 112) Operating costs (Rs 655.94 41.12) aria statement of ABC Company 2 ven ow, fe ] eee ¢ ia As Rabies an aes [Amini ects Reale ee ag Ns i Payable bs Total current el = ‘eee | toalcamen tastes |e208 Knanal’s T.U. Solution of Basic Financial Management Second prepare balance sheet for 2012 r Amount Liabilities and equips (Rs) GS (RS36NWATI) [RS ASBI| Accounts payee ti 72,000 1.12) ee Ray! Receivables (Rs 72000 x] 80,640] Notes pays i 122) i Inventory (Rs 144,000 x] 161,200 Aecruals (R536, 000% Tp 112) ‘| i Tal cuent asses (Rs RS 252.240 Total cament abi 252,000 « 1.12) owt Net fixed assets (Rs R5922360| Common soak 288,000 « 1.12) : Retained earings OR : + 24,366,852) j ; Additional funds needed i | Total assets 6.6080 | Total abies & uy b. Given: Profit margin (M) = 6%; Dividend payout ratio (PR) = 40! rate (RR) = 1 - DPR = 1 - 0.40 = 0.60 Or, 60%; Growth rat ie We have, von (@) Qoum(i) ove $388 G8 arom 2) ©r,0= (075-015) 0186 (+ ) : ©r,0= 060-0136 (++) oO) te Or, (724) =165667 Or, 16.6667 g=1 +g Or, 15.6667g = 1 %; Retention te (g) =2; AFN=9 aa Or, 8 = T5667 = 0.0.0638 Or, 6.38% Therefore, 6.38 percent growth fate in sales leads to zero needed for external financing. : a