[You are the financial manager for a firm with the following balance sheet:]

Assets Liabilities and Equity

Cash $ 6,000 Accounts payable $ 15,000

Marketable securities 14,000 Accruals 10,000

Accounts receivable 30,000 Short-term bank loan 15,000

Inventory 20,000 Long-term debt 20,000

Plant and equipment 30,000 Common stock 10,000

Retained earnings 30,000

$100,000 $100,000

Sales are currently $100,000 and you expect them to decline by 20% to $80,000. You have previously used percent of sales to forecast selected assets and liabilities (i.e., accounts receivable, inventory, accounts payable, and accruals).

Other factors that will affect your forecast include:

1. $10,000 of the bank loan must be retired.

2. You believe that the plant and equipment are sufficient to meet the declining sales.

3. The net profit margin on sales is 10%.

4. The firm distributes all earnings.

5. The marketable securities will not mature for two years.

To help forecast the firm's future financial position, fill in all the anticipated entries prior to any changes in the firm's debt structure. Since the entries are forecasted, the sum of the two sides need not be balanced.

Assets Liabilities and Equity

Cash $ 6,000 Accounts payable $

Marketable securities 14,000 Accruals

Accounts receivable Bank loan

Inventory Long-term debt 20,000

Plant and equipment 30,000 Common stock 10,000

Retained earnings

$ $ .

Based on your forecasts, answer the following questions:

1. Will the firm need additional finance? If so, how much additional financing will the

firm need?

2. If the firm were to liquidate its marketable securities at a loss for $12,000, would that cover its financial needs? Explain

3. The terms of the long-term debts indenture will not permit additional long-term if the quick ratio is less than 2:1. Based on the forecast, will the firm meet this condition?

4. Would a change in the dividend policy help solve any financial needs? Explain.