Exam 14: Short-Term Financial Planning

A sales forecast for the coming year would reflect

The treasurer for Chic Man Clothing must decide how much money the company needs to borrow in July.The balance sheet for June 30,2010 is presented below: Chic Man Clothing Balance Sheet June 30,2010 The company expects sales of $400,000 for July.The company has observed that 25% of its sales is for cash and that the remaining 75% is collected in the following month.The company plans to purchase $345,000 of new clothing.Usually 70% of purchases is for cash and the remaining 30% of purchases is paid in the following month.Salaries are $135,000 per month,lease payments are $35,000 per month,and depreciation charges are $20,000 per month.The company plans to purchase a new van for $60,000 in July and sell its marketable securities for $123,000.If the company must maintain a minimum cash balance of $25,000,how much money must the company borrow in July?

Lindsey Insurance Co.has current sales of $10 million and predicts next year's sales will grow to $14 million.Current assets are $3 million and fixed assets are $4 million.The firm's net profit margin is 7 percent after taxes.Presently,Lindsey has $900,000 in accounts payable,$1.1 million in long-term debt,and $5 million (including $2.5 million in retained earnings)in common equity.Next year,Lindsey projects that current assets will rise in direct proportion to the forecasted sales,and that fixed assets will rise by $500,000.Lindsey also plans to pay dividends of $400,000 to common shareholders. a.What are Lindsey's total financing needs for the upcoming year? b.Given the above information,what are Lindsey's discretionary financing needs?

Discretionary financing needs will be higher if ________.Assume "all else equal."