Question

7. [Short-Term Financial Planning) Artero Corporation is a traditional toy products retailer that recently started an Internet-based subsidiary that sells toys online. A markup is added on goods the company purchases from manufacturers for resale. Swen Artero, the company president, is preparing for a meet- ing with Jennifer Brown, a loan officer with First Banco Corporation, to review year-end financing re- quirements. After discussions with the company's marketing manager, Rolf Eriksson, and finance manager, Lisa Erdinger, sales over the last three months of 2017 are forecasted to be: SALES FORECAST (IN S THOUSANDS) MONTH October 2017 November December $1,000 1,500 3,000

Answer 1

Income Statement

Oct 17      Nov 17     Dec 17

1. Sales                                                                                 700                       700                       700                                                                                              

              Less: Cost of goods sold (80% of sale)                       560                       560                       560

                                                                                                         ------                     ------                     -----                                     

2. Gross profit (sales-cgst)                                              140                       140                       140                                                         

               Less Other Exp.

              Other cash exp (7 % on sale)                                        49                          49                          49                                               

              Depreciation exp                                                            10                          10                          10                                                 

   

2. Profit before Interest & Tax (OP-OE)                        81                          81                          81                                  

               Less: Interest ( 12% )                                                     9.72                      9.72                      9.72                                     Profit after Interest & before Tax                              71.28                    71.28                    71.28                             

               Less: Income Tax (40 % )                               28.51                    28.51                    28.51                                                           

3. Retained earnings/Reserve/Balance in P&L A/c 42.77                       42.77                    42.77      

Balance Sheet

Assets				Liabilities
Particulars	Oct 17	Nov 17	Dec 17	Particulars	Oct 17	Nov 17	Dec 17
Cash	80	80	80	Amount payble
Ac Receivable	700	700	700	Notes payble
Inventories	500	500	500	L.term debt
Net F.Assetds	750	750	750	Equity

Cash Budget

Receipt				Payment
Particulars	Oct 17	Nov 17	Dec 17	Particulars	Oct 17	Nov 17	Dec 17
Opening Balance	50	80	80	Inventory	700	700	700
Account receivable	700	700	700	Cash exp 7% on sale	49	49	49
Loan (balancing)	79	79	79	Balance to maintain	80	80	80
	829	829	829		829	829	829