Chapter 3 Problem 16

a Using the information provided, construct a monthly cash budget for October through December 2008. Based on your analysis, will Noble enjoy a surfeit of cash, or require external financing?
b Construct a pro forma income statement for the first fiscal quarter of 2009 and a pro forma balance sheet as of December 31, 2008. What is your estimated external financine needed for December 31?
c Does the December 31, 2008, estimated external financing equal your cash surplus (deficit) for this date from your cash budget?
d Based on your answers above, construct a cash flow forecast for Noble for the period October through December 2008.
Noble Selected Information and Financial Statements

Sales (20 percent for cash, the rest on 30-day credit terms):
2008 Actual 2008 Projected
July August September October November December
76,000 88,000 266,000 125,000 51,000 53,000

Purchases (all on 60-day terms):
2008 Actual 2008 Projected
July August September October November December
116,000 122,000 257,000 62,000 27,000 26,000


Salaries payable monthly 20,000
Principal payment on debt due in December 25,700
Interest due in December 9,000
Dividend payable in December 15,000
Taxes payable in November 19,000
Addition to accumulated depreciation in December 4,000

Cash balance on October 1, 2005 35,000
Minimum desired cash balance 15,000




Noble’s annual income statement and balance sheet for September 30, 2008 appear below.
Additional information about the company's accounting methods and expectations for
The last three months of 2008 appear in the footnotes.

Noble
Annual Income Statement
Fiscal Year ended September 30, 2008 ($ 000)

Net sales 1,581.6
Cost of goods sold1 1,098.0
Gross profits 483.6
Selling and administrative expenses2 240.0
Interest expense 18.0
Depreciation3 16.0
Net profit before tax 209.6
Tax at 33% 69.2
Net profit after tax 140.4


Noble
Balance Sheet
September 30, 2008 ($ 000)

Assets
Cash 34.0
Accounts receivable 212.8
Inventory 425.0
Total current assets 671.8
Gross fixed assets 135.0
Accumulated depreciation 52.0
Net fixed assets 83.0
Total assets 754.8

Liabilities
Bank loan 0.0
Accounts payable 379.0
Accrued expenses4 55.0
Current portion long-term debt5 25.7
Taxes payable 56.0
Total current liabilities 515.7
Long-term debt 120.0
Shareholders' equity 119.1
Total liabilities and equity 754.8

1. Cost of goods sold consists entirely of items purchased during the quarter.
2. Selling and administrative expenses consist entirely of salaries.
3. Depreciation is straight-line at the rate of $4,000 per quarter.
4. Accrued expenses are not expected to change in the last quarter.
5. $25.7 due December 2008. No payments for remainder of year.

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