Financial Forecasting SOLVE THE FOLLOWING PROBLEM: Use the percentage of sales forecasting method to compute the additional financing needed by LSS Inc., if sales are expected to increase from a current level of P 20,000,000 to a new level of Php 25,000,000 over the coming year. LSS expects earnings after taxes to equal Php 1,000,000 over the next year (2018). LSS intends to pay a Php 300,000 dividend next year. The current year balance sheet for LSS is as follows: LSS INC. Balance Sheet as of December 31, 1018 Cash 1,000,000 c. Additional financing needed Accounts Payable 3,000,000 Accounts Receivable 1,500,000 Notes Payable 3,000,000 Inventories 6,000,000 Long term Debt 2,000,000 Net Fixed Assets 3,000,000 Stockholder’s Equity 3,500,000 TOTAL ASSETS 11,500,000 TOTAL LIABILITIES &EQUITY 11,500,000 All assets except “cash are expected to vary proportionately with sales. Of total liabilities and equity, only “accounts payable” is expected to vary proportionately with sales. NOTE: • Cash stays constant • Accounts receivable equal 7.5% of sales • Inventories equal 30% of sales • Net fixed assets equal 15% of sales • Accounts payable is equal to 15% of sales • Notes payable and long term debt remain constant. • Stockholder’s equity increases by the amount of forecasted addition to retained earnings of P 700,000 REQUIRED: a. Forecasted income and retained earnings for 2019 b. Forecasted balance sheet for 2019 c. Additional Financing Needed
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Financial
SOLVE THE FOLLOWING PROBLEM:
Use the percentage of sales forecasting method to compute the additional financing needed by LSS Inc., if sales are expected to increase from a current level of P 20,000,000 to a new level of Php 25,000,000 over the coming year. LSS expects earnings after taxes to equal Php 1,000,000 over the next year (2018). LSS intends to pay a Php 300,000 dividend next year. The current year
LSS INC. Balance Sheet as of December 31, 1018
Cash 1,000,000
c. Additional financing needed Accounts Payable 3,000,000
Inventories 6,000,000 Long term Debt 2,000,000
Net Fixed Assets 3,000,000
TOTAL ASSETS 11,500,000 TOTAL LIABILITIES &EQUITY 11,500,000
All assets except “cash are expected to vary proportionately with sales. Of total liabilities and equity, only “accounts payable” is expected to vary proportionately with sales.
NOTE:
• Cash stays constant
• Accounts receivable equal 7.5% of sales
• Inventories equal 30% of sales
• Net fixed assets equal 15% of sales
• Accounts payable is equal to 15% of sales
• Notes payable and long term debt remain constant.
• Stockholder’s equity increases by the amount of forecasted addition to
P 700,000
REQUIRED:
a. Forecasted income and retained earnings for 2019
b. Forecasted balance sheet for 2019
c. Additional Financing Needed
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