National Autonomous University of Honduras in the Valley of Sula UNAH-VS

Subject: Financial Administration

AGE 276 Section: 2000

Theme: Cash flow and financial planning.

Professor: Lic. Roger Manuel Meléndez Artica

Members of the Group

Edwar Lenin Padilla Cruz ACCOUNTS: 20112402065
Yalitza Mireya García Galo 20122001202
Evelyn Sulema Burgos Flores 20122000205
Marlen Dioscelyn Alvarenga Sauceda 20062000459
Samuel Isai Argueta Cayes 20192001609

San Pedro Sula March 13, 2022

INTRODUCTION

In this work, as we solve the following exercises taken from the textbook
Financial Management Principles Chapter 4; by solving them we will be able to understand that not
It is the same when we talk about strategic plans vs operational plans, and the importance of focusing on
in the cash flows so as not to have solvency problems in the future.
Everything based on sales projections, we will determine if it is profitable to sell more or sell less, accordingly.
to the income statements of the companies mentioned in each exercise below.
 SOLVE THE EXERCISES BELOW;

E4-3 Determine the operating cash flow (OCF) of Kleczka, Inc., based on the following
data (all values are in thousands of dollars). During the year, the company had sales
From $2,500, the cost of goods sold amounted to a total of $1,800, the operating expenses
rose to $300, and the depreciation expenses were $200. The company
it is at the fiscal level of 35%.

Sales $2,500.00
Cost of sales $1,800.00
Gross utility $700.00
Operating Expenses
Administrative expenses $300.00
Depreciation expenses $200.00
Total operating expenses $500.00
Earnings before taxes $200.00
Tax (Fiscal rate 35%) $70.00
Net utility $130.00

FEO = (($500 * (1 - 0.35)) + 200

$525
$525

E4-4 During the year, Xero, Inc. experienced an increase in its net fixed assets of
$300,000 and had a depreciation of $200,000. It also experienced an increase.
of its current assets of $150,000 and an increase in its accounts payable and debts
accumulated of $75,000. If their operating cash flow (OCF) for that year was
$700,000, calculate the free cash flow (FCF) of the company for that year.

Free cash flow = 700,000 – 300,000 – 150,000 = 250,000 The company Xero, Inc.
It has a free cash flow of $250,000
E4-5 Rimier Corp. predicts sales of $650,000 for 2013. Assume that the company has
fixed costs of $250,000 and variable costs that amount to up to 35% of sales.
Operating expenses include fixed costs of $28,000 and a variable portion equal to
7.5% of sales. It is estimated that interest expenses for the next year will be
$20,000. Calculate the net income before taxes of Rimier for 2013.

Rimier Corp
Sales $650,000.00
Cost of goods sold
Fixed Costs $250,000.00
Variable Costs $227,500.00
Total cost of sales $477,500.00

Gross profit $172,500.00

Operational expenses
Fixed expenses $28,000.00
Variable expenses $48,750.00
Total operating expenses 76,750.00

Interest expenses $20,000.00

Utility before the
tax on the
rent $95,750.00
P4.5 Classification of cash inflows and outflows Classify each of the following
items such as cash inflow (E) or outflow (S) or neither (N).

Category Change(s) Classification Area Change(s) Classification

Cash (+)100 S Ct to charge (-)700 E
Cts x pay -1000 S Net utility (+600) E
Doc to pay (+)500 E Depreciation (+)100 E
Long-term debt -2000 S Acquisition of (+)600 S
Inventory (+)200 S Dividends in cash (+800) S
Fixed assets (+ )400 Sale of shares (+)1000 E
P4.6 Calculation of operating and free cash flows Consider the balance sheets and the
selected data from the income statement of Keith Corporation shown at
continuation.

a) Calculate the net operating profit after taxes (NOPAT) for the year that
ends on December 31, 2012, using equation 4.1.

UONDI $ 2,700.00 (1-0.40) = $ 1,620.00

0.6

b) Calculate the operating cash flow (OCF) of the company for the year ending on the 31st.
from December 2012, using equation 4.3.
 $ 2,700.00 (1-0.40) + $ 1,600.00 = $ 3,220.00
0.6

c) Calculate the free cash flow (FCF) of the company for the year ending on the 31st of
December 2012, using equation 4.5.

IAFN= $ 200.00 + $ 1,600.00 = $ 1,800.00

IACN= $ 1,400.00 - $ 100.00 + $ -100.00 = $ 1,400.00
$ 3,220.00 - $ 1,800.00 - $ 1,400.00 = $ 20.00

d) Interpret, compare, and verify the cash flow calculations you made in
items b) and c)

The comparison between the items is that we have the positive amount of 3,220 but we still do not
They have covered the payments of the investors, only the interest and tax payments.

It can be observed that the result indicates that the taxes have already been paid.
interests, and investors, most of the time a positive result is obtained but not
very profitable since the free cash flow will need to be improved for next year or period.
P4.7 Cash inflows A company has actual sales of $65,000 in April and $60,000
in May. It expects sales of $70,000 in June and $100,000 in July and August. If the
Sales are the only source of cash inflows and half of them are in cash and the
the remaining amount is charged consistently over the next two months, what are the
entradas de efectivo esperadas de la empresa para junio, julio y agosto?

CASH INCOME PROGRAM

Case 1
April May June July August September

SALES 65,000 60,000 70,000 100,000 100,000 0

Cash sales 50% 32,500 30,000 35,000 50,000 50,000

Month 1 25% 16,250 15,000 17,500 25,000 0

Mes2 25% 16,250 15,000 17,500 25,000

Total Entries 32,500.00 46,250.00 $ 66,250.00 $ 82,500.00 $ 92,500.00 25,000.00

 P4.8
Cash disbursement program: María Brothers, Inc. needs a cash disbursement schedule for the months of April and May.
and June. Use the format of table 4.9 and the following information to develop that program.
Ventas: febrero = $500,000; marzo = $500,000; abril = $560,000; mayo = $610,000; junio = $650,000; julio = 650,000
Purchases: Purchases are calculated as 60% of the sales of the following month, 10% of the purchases are made in cash,
50% of the purchases are paid one month later, and the remaining 40% of the purchases are paid two months later.
Rent: The company pays a rent of $8,000 monthly.
Salaries and wages: The costs of base salaries and wages are fixed at $6,000 per month, plus a variable cost of 7% of the current month's sales.
Taxes: A tax payment of $54,500 will be made in June.
Disbursements for fixed assets: In April, new equipment will be purchased and paid for with a cost of $75,000.
Interest payments: In June, an interest payment of $30,000 will be made.
Cash dividends: In April, $12,500 in dividends will be paid.
Refunds and withdrawals of principal: During these months, no refunds or withdrawals of principal will be made.
February March April May June July
Projected Sales 500000 500000 560000 610000 650000 650000

Projected cash disbursement program for María Brothers, Inc.

February March April May June July
Purchases (60% of sales) 300000 336000 366000 390000 390000 0
Cash Purchases (10%) 30000 33600 36600 39000 39000 0
Payments C/P
After 1 month (50%) 150000 168000 183000 195000 0
After 2 months 40%) 120000 134400 146400 0
Rent payment 8000 8000 8000 0
Salaries and wages 45200 48700 51500 0
Taxes 54500
Disbursements in fixed assets 75000
Interest payment 30000
Payment of Dividends effective. 12500
Total Cash Disbursement $ 30,000.00 $ 183,600.00 $ 465,300.00 $ 413,100.00 $ 524,400.00 0

P4.9
Cash Budget: Basic level, Grenoble Enterprises had sales of $50,000 in March and $60,000 in April. The forecasted sales in
May, June, and July are $70,000, $80,000, and $100,000, respectively. On May 1, the company has a cash balance of $5,000 and wishes to maintain
a minimum cash balance of $5,000. With the following data, prepare and interpret a cash budget for the months of May, June, and July.
The company makes 20% of its sales in cash, collects 60% the following month, and the remaining 20% two months after the sale.
The company receives another income of $2,000 monthly.
3. The amounts of the actual or expected purchases of the company, all in cash, are $50,000, $70,000, and $80,000 in the months of May, June, and
July, respectively.
The rent is $3,000 per month.
5. Salaries and wages correspond to 10% of the sales from the previous month.
Cash dividends of $3,000 will be paid in June.
A payment of the principal and interest of $4,000 will be made in June.
A cash purchase of equipment costing $6,000 is scheduled for July.
Taxes of $6,000 will be paid in June.
Projected cash inflow program for Grenoble Enterprises
March April May June July
Predicted Sales 50000 60000 70000 80000 100000
Cash sales (20%) 14000 16000 20000
Collection C/C
After 1 month (60%) 36000 42000 48000
After 2 months (20%) 10000 12000 14000
Other income 2000 2000 2000
Total cash receipts 62000 72000 84000
Projected cash outflow program for Grenoble Enterprises
March April May June July
Real purchases 0 0 50000 70000 80000
Cash purchases 50000 70000 80000
Collection C/P
After 1 month (60%) 0 0 0
After 2 months (20%) 0 0 0
Rent payment 3000 3000 3000
Salaries and wages 6000 7000 8000
Taxes 6000
Disbursements in fixed assets 6000
Payment of Principal and Interest 4000
Payment of dividends effectively. 3000
Total Cash Disbursement 0 0 59000 93000 97000
 Cash Budget of Grenoble Enterprises
May June july
Total cash receipts 62000 72000 84000
(-) Total cash disbursements 59000 93000 97000
Net cash flow 3000 -21000 -13000
(+) Initial cash 5000 8000 -13000
Final cash 8000 -13000 -26000
Minimum effective balance 5000 5000 5000
Total funding required (documents
to be paid -18000 -31000
Excess cash balance (marketable securities) 3000

P4.11
Cash Budget: Advanced Level
Projected cash inflow program for Xenocore, Inc.
Sept. 2012 October 2012 Nov. 2012 Dec. 2012 Jan.2013 February 2013 Mar. 2013
Forecasted Sales 210,000.00 250,000.00 170,000.00 160,000.00 140,000.00 180,000.00 200,000.00
Cash sales (20%) 42,000.00 50,000.00 34,000.00 32,000.00 28,000.00 36,000.00 40,000.00
Collection C/C
After 1 month (40%) - 84,000.00 100,000.00 68,000.00 64,000.00 56,000.00 72,000.00
After 2 months (40%) - - 84,000.00 100,000.00 68,000.00 64,000.00 56,000.00
Other income 12,000.00 - - 15,000.00 27,000.00 15,000.00
Total cash entries $ 54,000.00 $ 134,000.00 $ 218,000.00 $ 200,000.00 $ 175,000.00 $ 183,000.00 $ 183,000.00

Projected cash outflows program for Xenocore, Inc.

Sept. 2012 October 2012 Nov. 2012 Dec. 2012 Jan. 2013 Feb. 2013 Mar. 2013
Real purchases 120,000.00 150,000.00 140,000.00 100,000.00 80,000.00 110,000.00 100,000.00
Cash purchases (10%) 12,000.00 15,000.00 14,000.00 10,000.00 8,000.00 11,000.00 10,000.00
Collection C/P
After 1 month (50%) 60,000.00 75,000.00 70,000.00 50,000.00 40,000.00 55,000.00
After 2 months (40%) 48,000.00 60,000.00 56,000.00 40,000.00 32,000.00
Rent payment 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00
Salaries and wages 42,000.00 50,000.00 34,000.00 32,000.00 28,000.00 36,000.00
Taxes
Disbursements in fixed assets 25,000.00
Interest Payment 10,000.00
Principal Payment
Payment of Dividends effective. 20,000.00
Total Disbursement in Cash $ 32,000.00 $ 137,000.00 $ 207,000.00 $ 219,000.00 $ 196,000.00 $ 139,000.00 $ 153,000.00

Cash Budget of Grenoble Xenocore, Inc.

Sept. 2012 October 2012 Nov. 2012 Dec. 2012 Jan. 2013 Feb. 2013 Mar. 2013
Total cash entries 218,000.00 200,000.00 175,000.00 183,000.00 183,000.00
(-) Total cash disbursements 207,000.00 219,000.00 196,000.00 139,000.00 153,000.00
Net cash flow 11,000.00 19,000.00 - 21,000.00 44,000.00 30,000.00
Initial cash 22,000.00 33,000.00 14,000.00 7,000.00 37,000.00
Final cash 33,000.00 14,000.00 7,000.00 37,000.00 67,000.00
(-) Minimum effective balance - 15,000.00 - 15,000.00 15,000.00 15,000.00 15,000.00
Total financing required (documents)
to be paid - 1,000.00 - 22,000.00
Excess cash balance (negotiable securities) $ 18,000.00 $ - $ - $ 22,000.00 $ 52,000.00

Cash Budget of Grenoble Xenocore, Inc.

September 2012 October 2012 Nov. 2012 Dec. 2012 Jan. 2013 Feb. 2013 Mar. 2013
Total cash inflows 255,000.00 200,000.00 175,000.00 183,000.00 183,000.00
(-) Total cash disbursements 207,000.00 219,000.00 196,000.00 139,000.00 153,000.00
Net cash flow 48,000.00 - 19,000.00 21,000.00 44,000.00 30,000.00
(+) Initial cash 22,000.00 70,000.00 51,000.00 30,000.00 74,000.00
Final cash 70,000.00 51,000.00 30,000.00 74,000.00 104,000.00
Minimum effective balance - 15,000.00 - 15,000.00 15,000.00 15,000.00 15,000.00
Total financing required (documents
for payment) - -
Excess cash balance (marketable securities) $ 55,000.00 $ 36,000.00 $ 15,000.00 $ 59,000.00 $ 89,000.00

The line of credit would need to be $37,000.00, in order to exactly cover up to the month of April where the most serious problem arises.
due to lack of cash to meet their needs.

P4.15 Pro forma income statement The marketing department of Metroline

Manufacturing calculates that its sales in 2013 will be $1.5 million. It is expected that the
expenses for interest remain unchanged at $35,000; the company plans to
 pay $70,000 in cash dividends during 2013. The income statement of
Metroline Manufacturing for the year ending December 31, 2012 is presented
later, along with a classification of the cost of goods sold and expenses
company operations in its fixed and variable components.

a) Use the percentage of sales method to prepare a pro forma income statement for the year ending December 31, 2013.
Cost of Sale

V = Revenue x from sales Pro Forma Income Statement, using the method
 of sales percentage, of Metroline Manufacturing of the year
Operating Expenses which ends on December 31, 2013

Financial Expenses Sales revenue 1,500,000.00

Less: Cost of goods sold 975,000.00
Relationships: Gross profit 525,000.00
Less: Operating expenses 128,571.00
CV / V = 0.65 Operating utility 396,429.00
G.O / V = 0.086 Less: Interest expenses 35,000.00
0.025 Net utility before taxes 361,429.00
Less: Taxes (rate = 40%) 144,571.00
Net income after taxes 216,857.00
Less: Cash dividends 70,000.00
To retained earnings 146,857.00

b) Use the fixed and variable cost data to prepare a pro forma income statement for the year ending December 31, 2013.

Fixed Costs

Variable Costs

Total Costs

Fixed Expenses

Variable Expenses

Total Expenses

Relationships:

0.23
Classification of costs and expenses into fixed components and
variables from Metroline Manufacturing of the year that
ends on December 31, 2012

Cost of goods sold

 Fixed cost 210,000.00
Variable cost 700,000.00
Total costs 910,000.00
Operating expenses
Fixed expenses 36,000.00
Variable expenses 84,000.00
Total expenses 12,000.00

Pro Forma Income Statement, using fixed and variable costs, of

Metroline Manufacturing for the year ending December 31, 2013

Sales Revenue 1,500,000.00

Less: Cost of goods sold
Fixed cost 210,000.00
Variable cost 750,000.00
Gross profit 540,000.00
Less: Operating expenses
Fixed expenses 36,000.00
Variable expenses 90,000.00
Operating utility 414,000.00
Less: Interest expenses 35,000.00
Net income before taxes 379,000.00
Less: Taxes (rate = 40%) 151,600.00
Net income after taxes 227,400.00
Less: Cash dividends 70,000.00
To retained earnings 157,400.00
c) Compare the states obtained in sections a) and b). Which state probably provides the best calculation of the
results of 2013? Explain why.
The key point to identify here is that fixed costs make a company's profits more variable than its.
revenues. That is, when both profits and sales increase, profits tend to grow at a rate
faster, but when profits and sales decrease, the percentage decrease in profits with
frequency is greater than the rate of decrease in sales.
P4.17 Pro forma balance sheet: Leonard Industries wishes to prepare a balance sheet
pro forma for December 31, 2013. The company expects that sales for 2013
they rise to $3 million. The following information has been gathered:
A minimum cash balance of $50,000 is desired.
2. Negotiable values are expected to remain unchanged.
 Accounts receivable represent 10% of sales.
Inventories represent 12% of sales.
5. In 2013, a new machine will be acquired at a cost of $90,000. The total depreciation for the year will be $32,000.
Accounts payable represent 14% of sales.
7. It is expected that the accumulated debts, other current liabilities, and long-term debt
and the common shares remain unchanged.
8. The company's net profit margin is 4% and $70,000 in cash dividends are expected to be paid during 2013.
9. Below is the balance sheet as of December 31, 2012.

Solution:

Use the critical method to prepare a pro forma balance sheet for Leonard Industries as of December 31.
from 2013.

Proforma balance Leonard Industries December 31, 2013

ASSETS

Current Asset

Cash 50,000.00
Negotiable values 15,000.00
Accounts receivable (0.10) 300,000.00
Inventories (0.12) 360,000.00
Total current assets 725,000.00
Net fixed asset 658,000.00
Total assets 1,383,000.00

Proforma Balance Sheet Leonard Industries December 31, 2013

Liabilities and shareholders' equity

Current liabilities

Accounts payable (0.14) $ 420,000.00

Accumulated debts to pay 60,000.00
Other current liabilities 30,000.00
Total current liabilities 510,000.00
Long-term debts 350,000.00
Total liabilities 860,000.00
Common actions 200,000.00
Retained earnings 270,000.00
Total Shareholders' Equity 470,000.00
External funds required 53,000.00
Total liabilities and equity 1,383,000.00

1
Gross fixed assets at the beginning
600,000.00

More: new machine acquired

90,000.00
Less: Depreciation Expenses
32,000

Net fixed assets at the end

658,000.00
2
Retained earnings at the beginning (January 1, 2013)
220,000.00

More: Net utility after taxes ($3,000,000 * 0.04)

120,000.00

Less: Dividends paid

(70,000)

Retained earnings at the end (Dec. 31, 2013)

270,000.00

Total assets
1,383,000.00

Less: Total liabilities and equity

1,330,000.00

External funds required

53,000.00

How much additional financing will Leonard Industries require in 2013, if any? Analyze.
your answer.
$ 53,000.00

Based on the forecast and the desired level of certain accounts, the financial manager must arrange credit.
$53,000. Leonard Industries will require $53,000 in financing for 2013.
You should have $53,000 in credit.

Could Leonard Industries adjust its planned dividend for 2013 in order to avoid the situation
described in section b)? Explain how.

If Leonard Industries reduced its 2013 dividend to $17,000 or less, the firm would not need any financing.
additional. By reducing the dividend, more money is retained by the company to cover growth in other areas.
asset accounts

P4.18 Pro forma balance sheet Peabody & Peabody has sales in 2012 of $10 million.
He wishes to analyze the expected performance and funding needs in 2014.
that is, in 2 years. Based on the following information, answer sections a) and b).
The percentages of the items that vary directly with sales are as follows:
Accounts receivable, 12%
Inventories, 18%
Accounts payable, 14%
Net profit margin, 3%
2. It is expected that marketable securities and other current liabilities will remain unchanged.
 A minimum cash balance of $480,000 is desired.
In 2013, a new machine will be acquired at a cost of $650,000, and in 2014, equipment will be purchased at a
cost of $850,000. It is forecasted that the total depreciation will be $290,000 in 2013 and $390,000 in 2014.
It is expected that the accumulated debts will amount to $500,000 by the end of 2014.
6. No sales or long-term debt withdrawal is expected.
7. No sales or reacquisition of common stock are expected.
It is expected that the payment of dividends of 50% of the net profit will continue.
Sales are expected to be $11 million in 2013 and $12 million in 2014.
10. Below is the balance sheet as of December 31, 2012.
i

a) Prepare a pro forma balance sheet with a date of December 31, 2014

Company 'Peabody & Peabody'

Balance Sheet as of 31
December 2014

Active
Cash 480,000.00
Negotiable Values 200,000.00
CXC 1,440,000.00
Inventory 2,160,000.00
Total Current Assets 4,280,000.00

Total Fixed Asset 4,820,000.00

TOTAL ASSET 9,100,000.00

Passive

Accounts payable 1,680,000.00

Accumulated Debts 500,000.00
Other current liabilities 80,000.00
Total current liabilities 2,260,000.00
Long-term debt 2,000,000.00

Total Liabilities 4,260,000.00

Common capital 4,065,000.00
External funds required 775,000.00

TOTAL 9,100,000.00

LIABILITIES + EQUITY

Gross fixed assets 4,000,000.00

Disbursement of fixed assets 1,500,000.00
The depreciation expense - 680,000.00

Net fixed assets 4,820,000.00

Common capital 3,720,000.00

Net profit after taxes 2013 330,000.00
Net profit after taxes 2014 360,000.00
Dividends paid 2013 - 165,000.00
Dividends paid 2014 - 180,000.00

Common capital 4,065,000.00

 b) Analyze the changes in financing suggested by the prepared state in the
clause.

The company 'Peabody & Peabody' must make the necessary arrangements to
the additional funding needed should be at least 775,000 dollars
in the next two years based on the limitations outlined and at the same time of the
data projections.

P4 - 19 Integration: Pro forma states

Red Queen Restaurants wishes to develop financial plans.
Use the financial statements and the information presented below to create
delete the financial plans.

The following financial data is available:

1 The company estimated that its sales for 2013 will be $900,000.
2 The company expects to pay $35,000 in cash dividends in 2013.
3 The company wishes to maintain a minimum cash balance of $30,000.
4 Accounts receivable represent approximately 18% of annual sales.
 5 The company's final inventory will be directly modified by changes in
the sales of 2013.
6 A new machine will be acquired at a cost of $42,000 in 2013. The depreciation
The total for 2013 will be $17,000.
7 Accounts payable will be adjusted directly in response to changes in the
sales of 2013.
8 The taxes to be paid will be equal to a quarter of the recorded tax liabilities.
two in the pro forma income statement.
9 Negotiable securities, other current liabilities, long-term debt, and equity
commons will remain unchanged

a) Prepare a pro forma income statement for the year ending December 31
from 2013, using the sales percentage method
b) Prepare a pro forma balance sheet as of December 31, 2013, using the method
critical.
c) Analyze these statements and comment on the resulting required external financing.

Income statement of Red Queen Restaurants for

the year that ends on December 31, 2012
Cost of goods sold 600000
sales income $ 800,000.00 Sales 800000
Cost of goods sold $600,000.00 75%
Gross Profit $200,000.00 Operating expenses 100000
(-) Operating expenses 100,000.00 12.50% Sales 800000
net profit before taxes $ 100,000.00
(-) Taxes (rate = 40%) 0.4 $ 40,000.00
Net profit after taxes $ 60,000.00
(-) Cash dividends $ 20,000.00
Retained earnings $ 40,000.00

Balance sheet of Red Queen Restaurants

as of December 31, 2012

Assets Liabilities and shareholders' equity

Cash $ 32,000.00 Accounts payable $ 100,000.00
Negotiable securities $ 18,000.00 Taxes to be paid $ 20,000.00
Accounts receivable $ 150,000.00 Other current liabilities $ 5,000.00
Inventories $100,000.00 Total current liabilities $125,000.00
Total current assets $ 300,000.00 Long-term debt $ 200,000.00
Net fixed assets $ 350,000.00 Total liabilities $ 325,000.00
total assets $ 650,000.00 Common actions $ 150,000.00
Retained earnings $175,000.00

Total liabilities
your heritage of
the shareholders
$ 650,000.00

a) Prepare a pro forma income statement for the year ending December 31.
from 2013, using the percentage of sales method

Cost of goods sold $ 600,000.00 0.75 75

Sales $800,000.00

Operating expenses $ 100,000.00 0.125 12.5

Sales 800,000.00

Income statement of Red Queen Restaurants for

 the year that ends on December 31, 2013

sales income $ 900,000.00

(-) Cost of goods sold $ 675,000.00
Gross Profit $ 225,000.00
(-) Operating expenses $112,500.00
net income before taxes $ 112,500.00
(-) Taxes (rate = 40%) 0.4 $ 45,000.00
Net profit after taxes $ 67,500.00
(-) Cash dividends $ 35,000.00
Retained earnings $ 32,500.00

Note: The cost of sales represents 75% of sales.

Operating expenses represent 12.5% of sales.

b) Prepare a pro forma balance sheet as of December 31, 2013, using the critical method.
Balance sheet of Red Queen Restaurants
as of December 31, 2013

Actvos Liabilities and shareholders' equity

Effect $ 30,000.00 Accounts payable $ 112,500.00
Negotiable values $ 18,000.00 Taxes payable $ 31,250.00
Accounts receivable $ 150,000.00 Bank loans $ -20,750.00
Inventories $ 112,500.00 Other current liabilities $ 5,000.00
 Total current assets $ 310,500.00 Total current liabilities $ 128,000.00
Fixed net assets $ 375,000.00 Long-term debt $ 200,000.00
total assets $ 685,500.00 Total liabilities $ 328,000.00
Common actions $ 150,000.00
Retained earnings $ 207,500.00
Total liabilities and
heritage of the
shareholders $ 685,500.00

Amount of external financing $ -20,750.00

to balance the balance

c) Analyze these statements and comment on the resulting required external financing.

Despite the projection showing a profit higher than that of the year 2013 of $112,500
before taxes, the fact is that the net cash flows show a result of $
(-143.250) negative, and a box of $(111.250), also negative. Therefore, in order to be able to
to achieve its goals, the company will need to seek external financing of $141,250 in
year 2013, to maintain the minimum cash balance at the end of the fiscal year of $30,000, according to
the projections, since the operations based on the projected sales volume generate a
creditor box, without financing.

P4-20Integration: Pro forma states

P4-20 Integration: Pro forma statements Provincial Imports, Inc. has gathered
income statement and the balance sheet) and financial projections for 2012 for
use them in the preparation of financial plans for the following year (2013).

Income statement of Provincial Imports, Inc.

of the year that ends on December 31, 2012

Sales revenue $ 5,000,000.00

Cost of goods sold $ 2,750,000.00
Gross Utility $ 2,250,000.00
 (-) Operating expenses $ 850,000.00
Operational utility $ 1,400,000.00
(-) Interest expenses $ 200,000.00
Net profit before taxes $ 1,200,000.00
(-) Taxes (rate = 40%) 0.4 $ 480,000.00
Net income after taxes $ 720,000.00
(-) Cash dividends $ 288,000.00
To retained earnings $ 432,000.00

Information related to the financial projections for the year 2013:

Balance sheet of Provincia Imports, Inc.
as of December 31, 2012

Actvos Liabilities and shareholders' equity

Effect $ 200,000.00 Accounts payable $ 700,000.00
Negotiable values $ 225,000.00 Taxes payable $ 95,000.00
Accounts receivable $ 625,000.00 Documents payable $ 200,000.00
Inventories $ 500,000.00 Other current liabilities $ 5,000.00
Total current assets $ 1,550,000.00 Total current liabilities $ 1,000,000.00
Net fixed assets $ 1,400,000.00 Long-term debt $ 500,000.00
Total assets $ 2,950,000.00 Total liabilities $ 1,500,000.00
Common actions $ 75,000.00
Retained earnings $ 1,375,000.00
Total liabilities and equity $ 2,950,000.00
of the shareholders

Projected sales are $6,000,000

2) The cost of goods sold in 2012 includes $1,000,000 in fixed costs.
3) Operating expenses in 2012 include $250,000 in fixed costs.
4) Interest expenses remain unchanged.
The company will pay cash dividends in an amount equal to 40% of the profits.
net income after taxes.
6) Inventories and cash will double.
7) Negotiable securities, accounts payable, long-term debt and the
common stocks will remain unchanged.
8) Accounts receivable, accounts payable, and other current liabilities are modified.
They will fall in direct response to the change in sales.
9) During the year, a new computing system will be purchased at a cost of
$356,000. The total depreciation expenses for the year will be $110,000.
The tax rate will remain at 40%.

a) Prepare a pro forma income statement for the year ending December 31.
since 2013, using the fixed cost data provided to improve accuracy
of the percentage of sales method.

PRO FORMA INCOME STATEMENT

Provincial Imports, Inc.
For the year ended December 31, 2013

Sales revenue $ 6,000,000.00

Cost of goods sold $ 3,100,000.00
Gross Utility $ 2,900,000.00
Operating expenses $ 970,000.00
 Operational utility $ 1,930,000.00
(-) Interest expenses $ 200,000.00
Net profit before taxes $ 1,730,000.00
Taxes 0.4 $ 692,000.00
Net income after taxes $ 1,038,000.00
(-) Cash dividends $ 415,200.00
To retained earnings $ 622,800.00

b) Prepare a pro forma balance sheet as of December 31, 2013, using the information
provided action and the critical method. Include an adjustment account for profits
retained.

Balance sheet of Provincia Imports, Inc.

as of December 31, 2013

Actvos Liabilities and shareholders' equity

Effect $ 400,000.00 Accounts payable $ 840,000.00
Negotiable securities $ 275,000.00 Taxes to be paid $ 138,400.00
Accounts receivable $ 750,000.00 Documents payable $ 200,000.00
Inventories $ 1,000,000.00 Other current liabilities $ 6,000.00
Total current assets 2,425,000.00 Total current liabilities $ 1,184,400.00
Net fixed assets $ 1,646,000.00 Long-term debt $ 500,000.00
Total assets $ 4,071,000.00 Total liabilities $ 1,684,400.00
Common actions $ 75,000.00
Retained earnings $ 1,997,800.00
Required external financing $ 313,800.00
Total liabilities and equity $ 4,071,000.00
of the shareholders

c) Analyze these financial statements and comment on the resulting external financing required.
According to the critical method, the financing required to balance the pro forma balance sheet for the year 2013.
it is $313,800.00
Apr. 2013
250,000.00
50,000.00

80,000.00
72,000.00
12,000.00
$214,000.00

Apr. 2013
90,000.00
9,000.00

50,000.00
44,000.00
20,000.00
40,000.00
80,000.00

10,000.00
30,000.00
20,000.00
$303,000.00

Apr. 2013
214,000.00
 303,000.00
- 89,000.00
67,000.00
- 22,000.00
- 15,000.00

- 37,000.00
$ -

Apr. 2013
214,000.00
303,000.00
- 89,000.00
104,000.00
15,000.00
- 15,000.00

-
$ -
 0.75 75

0.125 12.5
conclusions

In this report, we have concluded that cash flow statements are a very effective tool.
since it is an accounting document that reports on the evolution or status of cash generated by the
company through its operations whether ordinary or extraordinary during a period
determined in the short term or long term, as well as that produced by other sources of financing that
generated cash (that is, detail all the sources of cash and its equivalents) and also detail in what
it was used, where all that mass of money (cash applications) was invested, for this there are methods to
obtain these results such as the direct and indirect method of cash flow since it is considered as
cash to the available resources and high liquidity investments, making it necessary to have the income statement and the
balance sheet attached documents to determine the cash flow.
BIBLIOGRAPHIC REFERENCES

Principles of Financial Management