Financial statements and additional information for Noble Equipment Corp. are available for download from McGraw-Hill's Connect or your course instructor (see the Preface for more information). The company's fiscal year end is September 30. Noble's management wants to estimate the company's cash balances for the last three months of calendar year 2017, which are the first three months of fiscal year 2018. The questions accompanying the spreadsheet ask you to prepare a monthly cash budget, pro forma financial statements, and a cash flow forecast for the period.

 

NOBLE EQUIPMENT CORP.
Facts and assumptions
Sales (20 percent for cash, the rest on 30-day credit terms):
2017 Actual			2017 Projected
July	August	September	October	November	December
76,000	88,000	266,000	125,000	51,000	53,000
Purchases (all on 60-day terms):
2017 Actual			2017 Projected
July	August	September	October	November	December
116,000	122,000	257,000	62,000	27,000	26,000
Salaries payable monthly				20,000
Principal payment on debt due in December				25,700
Interest due in December				9,000
Dividend payable in December				15,000
Taxes payable in November				19,000
Addition to accumulated depreciation in December				4,000
Cash balance on October 1, 2017				34,000
Minimum desired cash balance				15,000
NOBLE EQUIPMENT CORP.
INCOME STATEMENT ($ thousands)
Fiscal year ended September 30, 2017
Net sales			1,581.6
Cost of goods sold1			1,098.0
Gross profits			483.6
Selling and administrative expenses2			240.0
Interest expense			18.0
Depreciation3			16.0
Net profit before tax			209.6
Tax at 33%			69.2
Net profit after tax			140.4
BALANCE SHEET ($ thousands)
September 30, 2017
Assets
Cash			34.0
Accounts receivable			212.8
Inventory			425.0
Total current assets			671.8
Gross fixed assets			135.0
Accumulated depreciation			52.0
Net fixed assets			83.0
Total assets			754.8
Liabilities
Bank loan			0.0
Accounts payable			379.0
Accrued expenses4			55.0
Current portion long-term debt5			25.7
Taxes payable			56.0
Total current liabilities			515.7
Long-term debt			120.0
Shareholders' equity			119.1
Total liabilities and equity			754.8
1 Cost of goods sold consists entirely of items purchased during the quarter.
2 Selling and administrative expenses consist entirely of salaries.
3 Depreciation is straight-line at the rate of $4,000 per quarter.
4 Accrued expenses are not expected to change in the last quarter.
5 $25.7 due December 2017. No payments for remainder of year.

a. Using the information provided, construct a monthly cash budget for October through December 2017. Based on your analysis, will Noble enjoy a surplus of cash, or require external financing?

b. Construct a pro forma income statement for the first fiscal quarter of 2018 (Oct. through Dec. 2017) and a pro forma balance sheet as of December 31, 2017. What is your estimated external funding required for December 31?   c. Does the December 31, 2017 estimated external financing equal your cash surplus (deficit) for this date from your cash budget?                                                                     

d. Based on your answers above, construct a cash flow forecast for Noble for the period October through December 2017.