You are the finance manager of TLeon Industries Bhd. and you have been assigned to prepare the pro forma statement of financial position for December 31, 2020. The firm expects 2020 sales to total $3,000,000. The following information has been gathered. (1) The minimum cash balance desired is $50,000. (2) The companies marketable securities are expected to remain unchanged. (3) Its accounts receivable represent 10% of sales. (4) Inventories is expected to be 12% of sales. (5) The company will be acquiring a new machine costing $90,000 during 2020 , and the total depreciation for the year is expected to be $32,000. (6) Its accounts payable represent 14% of sales, while its accruals, other current liabilities, long-term debt, and common stock are expected to remain unchanged. (8) The company's net profit margin is 4%, and it expects to pay out $70,000 in cash dividends during 2020. (9) The December 31,2019 , statement of financial position is as follows: a. Using the judgmental approach prepare a pro forma balance sheet dated December 31, 2020, for TLeon Industries. (15 marks) b. How much, if any, additional financing will TLeon Industries require in 2020 ? Discuss. (3 marks) c. Could TLeon Industries adjust its planned 2020 dividend to avoid the situation described in part b? Explain how. (3 marks) d. What is the significance of the "plug" figure, external financing required? Differentiate between strategies associated with positive values and with negative values for external financing required. (5 marks) You are the finance manager of TLeon Industries Bhd. and you have been assigned to prepare the pro forma statement of financial position for December 31, 2020. The firm expects 2020 sales to total $3,000,000. The following information has been gathered. (1) The minimum cash balance desired is $50,000. (2) The companies marketable securities are expected to remain unchanged. (3) Its accounts receivable represent 10% of sales. (4) Inventories is expected to be 12% of sales. (5) The company will be acquiring a new machine costing $90,000 during 2020 , and the total depreciation for the year is expected to be $32,000. (6) Its accounts payable represent 14% of sales, while its accruals, other current liabilities, long-term debt, and common stock are expected to remain unchanged. (8) The company's net profit margin is 4%, and it expects to pay out $70,000 in cash dividends during 2020. (9) The December 31,2019 , statement of financial position is as follows: a. Using the judgmental approach prepare a pro forma balance sheet dated December 31, 2020, for TLeon Industries. (15 marks) b. How much, if any, additional financing will TLeon Industries require in 2020 ? Discuss. (3 marks) c. Could TLeon Industries adjust its planned 2020 dividend to avoid the situation described in part b? Explain how. (3 marks) d. What is the significance of the "plug" figure, external financing required? Differentiate between strategies associated with positive values and with negative values for external financing required
