CASH BUDGET & PRO FORMA INCOME STATEMENT

You are given the following information for the Thibs 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 (000s)

SALES $15,000

___________ __________________

Gross Profit __________________

Rent(50k) 150

Salaries((90k) 270

EBDIT ___________________

________

________

________

CASH BUDGET 4^th QTR (000s)

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 firms Cost of Goods Sold? $_____________

What is the firms 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