4) Prepare a cash forecast for the last quarter of the year (October - December) for a firm with the following forecast for sales and other, non-operational cash flows. Comment on the firm's monthly cash position. August September October November December Sales Forecast $ 70.0 $ 62.0 $ 40.0 $ 29.0 $ 52.0 Purchases Forecast | $ 49.0 $ 43.4 $ 28.0 $ 20.3 $ 36.4 Sales are expected to be collected on the following basis: 5% - Cash 45% - Collected one month later 47% - Collected two months later 3% - Uncollectible Purchases represent 70% of forecasted sales. The firm is offered 30 day terms from its suppliers. So it will pay for its purchases one month later. For example, the firm will pay for the August purchases ($45.5) in September. Use the following chart to forecast this firm's cash needs. The October net cash position is solved for you as an example. CASH INFLOWS OCTOBER NOVEMBER DECEMBER Cash Sales 5% $ 2.0 Credit Sales 45% $ 27.9 Credit Sales 47% in 32.9 Cash Flow from Sales $ 62.8 Other Cash Inflows $ 35.0 $ 35.0 $ 10.0 Total Cash Receipts $ 97.80 CASH OUTFLOWS Cash Flow from purchases (70% of prior month sales) $ 43.40 Other Cash Outflows $ $ 75.00 $ 120.00 Total Cash Disbursements $ 43.40 NET CASH FLOW $ 54.40 Beginning Cash $ 145.0 $ 199.4 Ending Cash $ 199.4 Cash Reserves $ 100.0 $ 100.0 $ 100.0 Net Cash Position $ 99.4 5) Another firm recently completed its fiscal year. The financial statements for last year follow: BALANCE SHEET Current Assets $ Net Fixed Assets $ 750,000 2,500,000 Current Liabilities $ Long Term Debt Net Worth $ 450,000 1,800,000 1,000,000 3,250,000 $ Total Assets $ 3,250,000 es INCOME STATEMENT Net Sales Expenses Net Profit $ Dividends $ $ $ 5,800,000 (4,930,000) 870,000 435,000 The firm is modeling the upcoming year to plan for needed external financing (NEF). The analyst makes the following assumptions: The sales division estimates a 25% increase in sales. The firm is operating at capacity, so fixed assets will remain proportional to sales. . . Forecast the amount of external funding needed in the upcoming year: NEF= Total Assets / Sales Change in Sales Current Liabilities / Sales Change in Sales Sales Net Profit Margin [1 - (Dividends/Net Profit)] X How might the firm reduce its reliance on borrowed funds