11. Toys-4-Kids manufactures plastic toys. Sales and production are highly seasonal. Below is a quarterly pro forma forecast indicating external financing needs for 2015. Assumptions are in parentheses. Toys-4-Kids 2015 Quarterly Pro Forma Forecast (s thousands) Qtr 1 Qtr 2 Otr3 Otr 4 Net sales Cost of sales (70 percent of sales) Gross profit Operating expenses Profit before tax Income taxes Profit after tax 300 210 90 560 (470) (188) (282) 375 263 113 560 (448) (179) (269) 3,200 2,240 960 560 400 160 240 5,000 3,500 1,500 560 940 376 564 Future Financial Performance Cash (minimum balance = $200,000) 1,235 927 200 200 Accounts receivable (75 percent of quarterly sales) 225 281 2,400 3,750 Inventory (12/31/14 balance = $500,000) 500 500 500 500 Current assets 1,960 1,708 3,100 4,450 Net plant & equipment 1,000 1,000 1,000 1,000 Total assets 2,960 2,708 4,100 5,450 Accounts payable (10 percent of quarterly sales) 30 38 320 500 Accrued taxes (payments quarterly in arrears) (188) (179) 160 376 Current liabilities (158) (142) 480 876 Long-term debt 400 400 400 400 Equity (12/31/14 balance $3,000,000) 2,718 2,450 2,690 3,254 Total liabilities and equity 2,960 2,708 3,570 4,530 External financing required 0 0 530 920 a. How do you interpret the negative numbers for income taxes in the first two quarters? b. Why are cash balances in the first two quarters greater than the min- imum required $200,000? How were these numbers determined? c. How was "external financing required," appearing at the bottom of the forecast, determined? d. Do you think Toys-4-Kids will be able to borrow the external fi- nancing required as indicated by the forecast