CASH BUDGET & PRO FORMA INCOME STATEMENT You are given the following information
ID: 340896 • Letter: C
Question
CASH BUDGET & PRO FORMA INCOME STATEMENT
You are given the following information for the Thib’s Oil Service Company:
Actual Sales 3rd QTR Estimated Sales 4th QTR
July $1,200,000 Oct. $3,000,000
Aug. $1,400,000 Nov. $5,000,000
Sept. $1,600,000 Dec. $7,000,000
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Actual Purchases 3rd QTR Estimated Purchases 4th QTR
July $1,000,000 Oct. $3,000,000
Aug. $1,500,000 Nov. $4,000,000
Sept. $2,000,000 Dec. $1,000,000
__________________________________________________________________
One-half (50 percent) of the sales each month are for cash, 30 percent is collected one month later and 20 percent is collected two months later.
Thib pays cash for 90% of its purchases and pays the other 10% the month following the purchase.
Other monthly cash expenses are estimated at $50,000 (rent), $90,000 (salaries) and $10,000 (interest).
Depreciation is $40,000 per month.
Cost of Goods Sold is 70% of Sales.
No change is expected in the 50% income tax rate. Income tax expense for October through December (4th QTR) will be paid in December.
Preferred Dividends of $100,000 will be paid in November.
Equipment totaling $4,000,000 will be purchased for cash in October.
In November, the firm will sell equipment for its book value (no tax consequence) of $200,000. The money will be collected in December.
The Company intends to float a $10,000,000 (raise capital by issuing bonds) bond issue in October. There will be 5% investment banker fee which will be paid in November (disregard for the income statement). The money for the bond issue will be received in December.
The cash balance is $100,000 on October 1, and a minimum balance of $100,000 is desired.
Prepare a Pro Forma Income Statement and a monthly Cash Budget for the Company AND ANSWER THE QUESTIONS ON THE ANSWER SHEET.
YOU MUST TYPE YOUR PRO FORMA INCOME STATEMENT, CASH BUDGET AND THE ANSWEER SHEET.
PRO FORMA INCOME STATEMENT
4th QTR (000’s)
SALES $15,000
___________ __________________
Gross Profit __________________
Rent(50k) 150
Salaries((90k) 270
EBDIT ___________________
________
________
________
CASH BUDGET 4th QTR (000’s)
AUG SEPT OCT NOV DEC
SALES 1,400 1,600 3,000 5,000 7,000
PURCHASES 1,500 2,000 3,000 4,000 1,000
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I. CASH INFLOWS
1.Cash Sales
2.
3.Col AR 2
4.Sell Equipment
5.
TOTAL CASH INFLOWS ____________________________________________
II. CASH OUTFLOWS
1. Cash Purchases __________________________________
2. Pay AP __________________________________
3. Rent, Salaries, Interest
4.
5.
6.
7.
III. TOTAL CASH OUTFLOWS
IV. NET CASH FLOW
V.
VI.
VII.
What is the firm’s Cost of Goods Sold? $_____________
What is the firm’s Net Income (Income After Taxes) $_____________
What is the Income Available to Common Stockholders? $_____________
What is the expected total cash inflow for October? $_____________
What is the expected net cash flow for October? $_____________
What is the expected total cash outflow for November? $_____________
What is the expected surplus or shortage for October? $_____________
What is the required cash balance? $_____________
What is the total amount of loan the Company needs? $______________
Will the firm be able to pay off its loan is December? Yes or No
Explanation / Answer
Schedule of cash collections:
Thib's Coil Service Company PROFORMA INCOME STATEMENT (000's) Sales 15000 Cost of good sold 10500 Gross Profit 4500 Expenses: Rent (50,000 per month) 150 Salaries (90,000 per month) 270 EBDIT 4080 Depreciation (40,000 per month) 120 EBIT 3960 Interest (10,000 per month) 30 EBT 3930 Income Tax (50%) 1965 Net income 1965Related Questions
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