CHAPTER 3: FINANCIAL FORECASTING & PLANNING
1.
AMAN DAMAI ENTERPRISE Balance Sheet as at 31 December 2012
31/12/2012
RM Cash
305,000
Accounts receivable
275,000
Inventory
600,000
Current assets
1,180,000
Plant and equipment
1,700,000
Less: Depreciation
(500),000
Net plant and equipment equipment
1,200,000
Total assets
2,380,000
Liabilities and Owners' Owners' Equity Accounts payable
150,000
Notes payable payable
125,000
Current liabilities
275,000
Bonds
500,000
Owners' equity Common stock
165,000
Paid-in-capital
775,000
Retained earnings
665,000
Total owners' equity
1,605,000
Total liabilities and owners' equity
2,380,000
Additional information:
Current sales for Aman Damai Enterprise are RM 1,100,000. The company is expecting an increase in sales to RM 1,330,000 in the next year.
The Net Profit Margin is 5% and the Dividend Payout Ratio is 25%.
Based on the information above, prepare a Pro forma Balance Sheet for 2013 of Aman Damai Enterprise by using percentage percentage of sales method. What is the projected Net Income Income for 2013?
2.
Binaraya Corporation is a merchandising corporation. Prepare a pro forma balance sheet for
Binaraya Corporation for the year 2014. The balance sheet for Binaraya Corporation as of 31 December 2013 is as follows:
Binaraya Corporation Balance Sheet as at 31 December 2013
Assets
Cash
(RM)
15,000
Account Receivable Inventories Fixed assets (net) Other assets
Liabilities & Equity
Accounts Payable
(RM)
2,000
6,500
Notes payable
28,500
57,000
Long-term debt
15,000
228,000
Common stock
168,000
3,000
Retained earnings
96,000
Total liabilities and Total assets
309,500
equity
309,500
Additional information:
i)
Sales for 2013 were RM100, 000 and it was expected to increase by 25%
ii) The company is operating at full capacity.
iii)
Net income for 2013 was RM15,000
iv)
Cash dividend for shareholders in 2013 amounted to RM 4,500
in 2014.
3. CELCO BERHAD Balance Sheet as at 30 June 2013
30/06/2013
RM Cash
205,000
Accounts receivable
175,000
Inventory
500,500
Current assets
880,500
Plant and equipment
1,500,000
Less: Depreciation
(250),000
Net plant and equipment
1,250,000
Total assets
2,130,500
Liabilities and Owners' Equity Accounts payable
85,500
Notes payable
175,000
Current liabilities
260,500
Bonds
455,000
Owners' equity Common stock
200,500
Paid-in-capital
500,000
Retained earnings
714,500
Total owners' equity
1,415,000
Total liabilities and owners' equity
2,130,500
Additional information:
Current sales for Celco Berhad are RM 1,500,000. The company is expecting an increase in sales to RM 2,000,000 in the next year.
The Net Profit Margin is 10% and the Dividend Payout Ratio is 15%.
Based on the information above, prepare a Pro forma Balance Sheet for 2014 Celco Berhad by using percentage of sales method. What is the projected Net Income for 2014?
4.
IT Technologies Inc is a newly formed computer manufacturer. IT Technologies Inc plans to
forecast its financial statement for the next year (2013). Given below i s the balance sheet for the company as of 30 June 2012:
IT Technologies Inc Balance Sheet as at 30 June 2012
Assets
(RM)
Liabilities & Equity
(RM)
Cash
75,000
Accounts Payable
39,000
Debtors
85,000
Accruals
85,000
Inventories
90,000
Notes payable
3,500
Total Current Assets
250,000
Long-term debt
85,000
Net Fixed Assets
155,000
Common stock
125,000
Retained earnings Total assets
405,000
Total liabilities and equity
67,500 405,000
Additional information:
Sales recorded for 2012 were RM355, 000 and it was expected to increase to
RM
400,000 in the next year
The Net Profit Margin is 7% and the Dividend Payout Ratio is 20%.
By assuming the company is operating at full capacity, prepare a Pro forma Balance Sheet for IT Technologies Inc by using percentage of sales method.
5.
Nurin Enterprise is preparing a pro forma balance sheet for the year 2013. The balance sheet
for Nurin Enterprise as of 31 December 2012 as follows:
Nurin Enterprise Balance Sheet as at 31 December 2012 Assets
Cash
(RM)
150,000
Liabilities & Equity
(RM)
Accounts Payable
55,000
Debtors
75,000
Accruals
75,000
Inventories
80,000
Notes payable
50,000
Total Current Assets
305,000
Long-term debt
150,000
Net Fixed Assets
300,000
Common stock
168,000
Retained earnings
107,000
Total liabilities and equity
605,000
Total assets
605,000
Additional information:
Sales for 2012 were RM350, 000 and it was expected to increase by 30% in the next year
The Net Profit Margin is 10% and the Dividend Payout Ratio is 25%.
Based on the information given, prepare a Pro forma Balance Sheet for Nurin Enterprise by using percentage of sales method (assume the company is operating at full capacity)
6.
Given are the financial statements of Petronize Gas Corporation.
PETRONIZE GAS CORPORATION Balance Sheet as at December 2011
Current Assets:
Current Liabilities:
Cash
225,000.00
A/c Payable
Marketable Securities
675,000.00
Notes Payable
1,800,000.00
Accruals
1,800,000.00
A/c Receivables
2,700,000.00
Inventories
1,687,500.00
Total Current Assets
5,287,500.00
Fixed Assets:
Total Current Liabilities
112,500.00
3,712,500.00
Long-term Debt:
Building
2,475,000.00
Equipment
4,612,500.00
Furniture
1,800,000.00
Equities:
8,887,500.00
Common Shares
Total Fixed Assets Depreciation
(2,925,000.00)
Net Fixed Assets
Total Assets
5,962,500.00
11,250,000.00
Bond
Retained Earnings Total Equities
Total Liabilities & Equities
4,500,000.00
2,587,500.00 450,000.00 3,037,500.00
11,250,000.00
Additional information:
i.
Sales for 2011 were RM 2,850,000 and it was expected to increase to RM 3,000,000 in year 2012.
ii.
iii.
iv.
v.
The company is operating at full capacity.
Net income for 2011 was RM415,000
Cash dividend for shareholders in 2011 amounted to RM 200,000
Based on the information above, prepare a Pro forma Balance Sheet of Petronize Gas Bhd for year 2012.
7.
Prepare a pro forma balance sheet for Resque Berhad for the year 2014. All the relevant
information is given below:
Resque Bhd Balance Sheet as at 31 December 2013
Assets
(RM)
Liabilities & Equity
(RM)
Cash
100,000
Accounts Payable
220,000
Marketable securities
130,000
Accruals
100,000
Account Receivable
150,000
Notes payable
300,000
Inventories
320,000
Long-term debt
470,000
Fixed assets (net)
850,000
Common stock
310,000
Retained earnings
150,000
Total assets
1,550,000
Total liabilities and equities
Sales for 2013 were RM10 million and it was expected to increase to million in 2014.
The company is operating at full capacity.
Net income for 2013 was RM500,000
Cash dividend for shareholders in 2013 amounted to RM 150,000
1,550,000
RM 15
8.
Sri Wijaya Sdn. Bhd
Makl
Balance Sheet as at 31 December 2013
umat tamb ahan :
Addi tiona
Asset
RM
Cash
2,500,000
Debtors
9,840,000
Inventories
7,320,000
Total Current Assets
19,660,000
Net Fixed Assets
23,040,000
Total Assets
42,700,000
l infor
Liabilities & Equities
mati
Creditors
3,570,000
on
Accruals
3,600,000
Notes payable
7,170,000
Long Term C loan
8,500,000
Ordinary u Shares
9,500,000
Retained r Earning
10,360,000
Total Liabilities & Equities r
42,700,000
ent sales for Sri Wijaya Sdn. Bhd are RM 10 million. The company is expecting an increase in sales by 20% in the next year.
The Net Profit Margin is 5% and the Dividend Payout Ratio is 20%.
Based on the information above, prepare a Pro forma Balance Sheet for Sri Wijaya Sdn. Bhd by using percentage of sales method. How much is the projected Net Income for 2014?
9.
Prepare a summarize pro forma income statement for Shamelin Jaya Corp for the period
ending 31 December 2014 based on the following i nformation:
Shamelin Jaya Corp Income Statement for the year ended 31 December 2013
RM Sales
500,000
Cost of goods sold
25,000
Gross profit
475,000
Operating expenses
150,000
EBIT
325,000
Interest expense
(13,000)
EBT
312,000
Taxes
(78,000)
Net income
234,000
i) Projected sales for 2014 is RM 750,000 and the firm is assuming to pay RM 75,000 in cash dividends in 2013
ii) The tax rate in 2014 is expected to increase to 30% of EBT
10. Prepare a summarize Pro forma Income Statement for Shamsuria Sdn Bhd for the period ending 31 December 2013 based on the following i nformation:
Shamsuria Sdn Bhd Income Statement for the year ended 31 December 2012
RM Sales (100% credit)
1,100,000
Cost of goods sold
600,000
Gross profit
500,000
Operating expenses
180,000
EBIT
320,000
Interest expense
(64,000)
EBT
256,000
Taxes
(87,000)
Net income
169,000
Projected sales for 2013 is RM 1,330,000 and the firm is assuming to pay RM 55,000 in cash dividends in 2011
11.
Bio Energy Resources Bhd wants to forecast cash receipts from sales and also cash
disbursements for the first quarter of 2015. The projected sales are given as follows:
Month
Sales (RM)
November 2014
300,000
December 2014
450,000
January 2015
550,000
February 2015
650,000
March 2015
800,000
April 2015
850,000
The company collects 40% of its sales in the month of sales and the remaining balance is paid equally in the following two months.
Purchases are made one month prior to sales and purchases are 80% of sales. The payment of purchases is made 60% in the month of purchase and 40% one month after purchase. Other monthly expenses are as follows: Salary
RM 40,000
Interest on loan
RM 1,000
Rent
RM 5,000
Utilities
RM 10,000
At the end of March 2015 the company plans to purchase equipment worth RM 70,000 from Metal Ware Company. The company also expects to receive RM 60,000 common stock dividend at the beginning of every quarter.
Ending cash balance in December 2014 is expected to be RM 100,000 and the company need to maintain a minimum cash balance of RM 20,000 every month. Any borrowing will cost 12% annually with the interest paid in the month following the month in which the funds are borrowed. Borrowing
takes place at the beginning of the month in which the need for funds arises. Assume that any short term financing needed to maintain the cash balance is paid off in the month following the month of financing if sufficient funds available.
Prepare the company’s cash budget for the first quarter of 2015.
12.
Fella Design Sdn Bhd is planning to request a line of credit from RHB Bank. The forecasted
sales and purchases for the company in year 2014 are as follows:
Month
Sales (RM)
Purchases (RM)
July
350,000
125,000
August
550,000
850,000
September
700,000
300,000
October
320,000
240,000
November
350,000
165,000
December
85,000
90,000
The collections of sales are as follows: a)
Cash sales is 10%
b)
75% is collected one month after sales
c)
The remaining balance is collected two months after sales
Payments for raw materials are typically made in the month following the one in which these costs have been incurred.
Monthly general and administration expenses amount to RM25,000; lease payment is RM 9,000 a month; depreciation charges is RM 35,000 a months; miscellaneous expenses is RM 2,500 a month; income tax payment of RM 63,000 is due in December and a progress payment of RM 180,000 on new machine must be paid in October. Cash on hand in October 1 amount to RM 130,000 and a minimum cash balance of
RM 90,000 must be maintained throughout the cash budget period.
Prepare a cash budget for October, November and December 2014.
13.
Haziq Sdn Bhd is in the process of estimating its short term financing needs for 3 months
ending in 30 Sept 2012. The estimated sales are as follows: July
RM 110,000
August
RM 120,000
September
RM 100,000
October
RM 110,000
The collections of sales are as follows: a)
50% is collected in the month of sales
b)
40% is collected one month after sales
c)
10% is collected two months after sales
The purchase is 70% of sales and is made one month before the sales occur. The payment is made equally in the month of purchases and one month after purchase. The fixed monthly expenditures are rent RM 5000 and salaries RM 15,000. The other operating expenses are estimated to be 10% of each month sales.
The company fells that a minimum cash balance of RM 50,000 should be maintained. Any borrowing will cost 10% annually with the interest paid i n the month following the month in which the funds are borrowed. Borrowing takes place at the beginning of the month in which the need for funds arises. Assume that any short term financing needed to maintain the cash balance is paid off in the month following the month of financing if sufficient funds available.
Prepare a cash budget for the months of July to September. Cash on hand on 30/6 was RM 50,000.
14.
The Jaya Corporation’s projected sales for the first six months of 2011 are as follows:
January
RM 90,000.00
April
RM 240,000.00
February
RM 120,000.00
May
RM 300,000.00
March
RM 135,000.00
June
RM 270,000.00
Of Jaya Corporation sales, 10% is for cash, another 60% is collected in the month following the sales, and 30% is collected in the second month following sale. November and December sales for 2010 were RM 220,000.00 and RM 175,000.00 respectively.
Jaya Corporation purchases its raw materials two months in advance of its sales equal to 60% of their final sales price. The supplier is paid one month after it makes delivery. For example, purchases for April sales are made in February and payment is made in March.
In addition, Jaya Corporation pays RM 10,000.00 per month for rent and RM 20,000.00 each month for other expenditures. Tax repayments of RM 22,500.00 are made each quarter, beginning in March.
The company’s cash balance at December 31, 2010 was RM 22,000 .00; a minimum balance of RM 15,000.00 must be maintained at all times. Borrowing takes place at the beginning of the month in which the funds are needed. Interest on short term loans equals 12% per annum and is paid in the month following the one in which funds are borrowed. Assume that any short term financing needed to maintain the cash balance is paid off in the month following the month of financing if sufficient funds available.
Prepare a quarterly cash budget for Jaya Corporation from January to March 2011.
15.
Kemudi Barat Sdn Bhd has achieved sales for the first four month of 2014 as follows:
Month
Actual Sales
January
80,000
February
85,000
March
75,000
April
90,000
Meanwhile, the firm has also projected its sales for the following four months of May, June, July and August 2014 as follows:
Month
Projected Sales
May
90,000
June
85,000
July
92,000
August
92,000
The firm collects 40% of its sales within the same month it is sold, while another 40% is collected one month following the sales and the balance is collected two months after sales.
The firm purchases raw materials one month before it sales and the cost of goods sold is 40% of sales. Payment is made equally in the month of purchase and one month after.
Furthermore, employees salaries is 50% of cost of goods sold and the amount is paid in full in the same month it is incurred. Other fixed expenses which all paid within the same month incurred are rent RM 10,000 and administration expenses RM 15,000. Income taxes for the year are estimated at RM 20,000 and will be paid equally in the months of June and December.
The company’s cash balance as of 30 th April 2014 was RM 15,000 and a minimum balance of RM 10,000 must be maintained at all times.
You are required to prepare a cash budget for the months of May, June and July 2014.
16.
Multech Corporation is a national distributor of computer, computer parts and services.
Management is in the process of preparing a monthly cash budget for the upcoming six months from
January to June, 2013. The Multech Corporation’s projected sales for the first six months of 2013 are as follows:
January
RM 60,000.00
April
RM 100,000.00
February
RM 75,000.00
May
RM 110,000.00
March
RM 88,000.00
June
RM 100,000.00
Roughly 50% of Multech’s sales are collected one month after the sales and
another
50%
two
months after the sales. November and December 2012 sales are RM 55,000.00 and RM 62,000.00 respectively.
Purchases generally equal 75% of sales and are made two months in advance of anticipated sales, with payments made in the month following purchases. Multech also pay other expenses as follows:
Months
Wages & Salaries
Rent
Other expenses
January
RM 3,000.00
RM 4,000.00
RM 1,000.00
February
RM 10,000.00
RM 4,000.00
RM
March
RM 7,000.00
RM 4,000.00
RM 1,200.00
April
RM 8,000.00
RM 4,000.00
RM 1,500.00
May
RM 6,000.00
RM 4,000.00
RM 1,500.00
June
RM 4,000.00
RM 4,000.00
RM 1,200.00
500.00
Additional expenditures recorded in the cash budget include the purchase of equipment worth RM 14,000.00 during February and the repayment of a RM 12,000.00 loan in Mac. Furthermore, in January, Multech will pay RM 7,500.00 interest on its long term debt for the period of January to June 2013. Multech also have to pay interest on short term note equals RM 600.00 in March.
Multech currently has a cash balance of RM 20,000.00 and wants to maintain a minimum balance of RM 10,000.00. Additional borrowing is necessary to maintain that minimum balance and borrowing takes place at the beginning of the month in which the funds are needed. Interest on borrowed funds equals 12% per annum and is paid in the month following the loan. Assume that any short term financing needed to maintain the cash balance is paid off in the month following the month of financing if sufficient funds available.
Prepare a quarterly cash budget for Multech Corporation from January to March 2013.
17. Narita Company is trying to estimate its needs for fund during each of the months covering the last quarter of 2014. The company projected sales the next months of 2014 are as given below:-
Months
Sales (RM)
June
55,000
July
60,000
August
65,000
September
75,000
October
70,000
November
60,000
December
53,000
In the past, 10% of sales were on cash basis, and the collections were 40% in the first month, 30% in the second month and 20% in the third months following the sales.
Purchases are 60% of each month sales, 15% of which are paid in cash, 65% are paid one month later and the rest is paid two months after purchase.
The monthly rent and loan payments are RM 2,000 and RM 1,000 respectively, to be paid every month. Utilities for the firm average 2% of sales and are paid in the month of their incurrence. In addition, an amount of RM 1,500 interest will be paid in November 2014 and taxes amounting RM 6,200 payable in December. The company also pays wages and salaries amount to RM 1,000 plus 5% of sales in each months.
The company fells that a minimum cash balance of RM 10,000 should be maintained. Any borrowing will cost 10% annually with the interest paid i n the month following the month in which the funds are borrowed. Borrowing takes place at the beginning of the month in which the need for funds arises. Assume that any short term financing needed to maintain the cash balance is paid off in the month following the month of financing if sufficient funds available.
Prepare a cash budget for the last quarter of 2014. Cash in hand on 30 th September is
RM
11,260.
18.
The Perdana Corporation’s projected sales for the months of 2013 are as follows:
January
RM 100,000
February
RM 130,000
March
RM 145,000
April
RM 160,000
Of Perdana Corporation sales, 50% is for cash, while another 50% is collected in the month following the sales. Meanwhile, the December sales for 2012 were RM 220,000.00.
Perdana Corporation purchases its raw materials one month in advance of its sales equal to 60% of their final sales price. The supplier is paid in the same month of purchases.
In addition, Perdana Corporation pays RM 10,000.00 per month for rent and RM 20,000.00 each month for other expenditures.
The company’s cash balance at December 31, 2012 was RM 22,000.00; a minimum balance of RM 15,000.00 must be maintained at all times. Borrowing takes place at the beginning of the month in which the funds are needed. Interest on short term loans equals 12% per annum and is paid in the month following the one in which funds are borrowed. Assume that any short term financing needed to maintain the cash balance is paid off in the month following the month of financing if sufficient funds available.
Prepare a cash budget of Perdana Corporation from January to March 2013.
19.
Syarikat Bestari has projected its sales for the first eight months of 2014 as follows:
Forecasted
Forecasted
Month
Month Sales (RM)
Sales (RM)
January
100,000
May
270,000
February
115,000
June
170,000
March
150,000
July
200,000
April
320,000
August
180,000
The company collects 20% of its sales in the month of sales, 50% in the month following the sale, and the remaining 30% two months following the sale. During November and December 2013, the company’s sales were RM 220,000 and
RM 175,000 respectively.
Syarikat Bestari purchases raw materials two months in advance of its sales equal to 65% of its final sales prices. The supplier is paid one month after delivery.
In addition, the company pays RM 10,000 per month for rent and RM 20,000 each month for other expenditure. Tax repaymenst of RM 30,000 are made each quarter beginning in March.
The company’s cash balance as of 31 December 2013 was RM 22,000; a minimum ba lance of RM 20,000 must be maintained at all times to satisfy the firm’s bank line of credit agreement. The company has arranged with its bank for short term credit at an interest rate of 12% per annum. Borrowing to meet estimated monthly cash needs takes place at the end of the month, and interest rate is not paid until the end of the following month.
Prepare a cash budget of January to March 2014 for Syarikat Bestari.
20.
Syarikat Mutiara Jati has projected it sales and purchases for the first six months of 2015 as
follows:
Month
Sales (RM)
Purchases (RM)
December 2014
200,000
120,000
January
240,000
190,000
February
250,000
210,000
March
260,000
195,000
April
350,000
280,000
May
400,000
350,000
June
385,000
300,000
The collection of sales is 40% for cash and the balance will be collected one month after the sales while payment of purchases is made one month after purchases.
The company pays RM 45,000 each month for wages and other operating expenses will be 10% of the monthly sales. In addition, tax repayment of RM 20,000 is made at the beginning of each quarter. The management also decided to buy a new machine costing RM 126,000 on June 2015 and the monthly depreciation will be RM 5,000. Meanwhile, interest payment of 12% per annum on RM 100,000 loan must be made at the beginning of each quarter.
The company’s cash balance on March 2015 will be RM 50,000 and a minimum cash balance of RM 50,000 must be maintained at all time. Any borrowing will cost 10% annually with the interest paid in the month following the month in which the funds are borrowed. Borrowing takes place at the beginning of the month in which the need for funds arises. Assume that any short term financing needed to maintain the cash balance is paid off in the month following the month of financing if sufficient funds available.
Prepare a cash budget of Syarikat Mutiara Jati for t he second quarter of 2015.
