BU340 Managerial Finance I

Part I

1. Cyber Security Systems had sales of 3,000 units at $50 per unit last year. The marketing manager projects a 20 percent increase in units volume sales this year with a 10 percent price increase. Returned merchandise will represent 6 percent of total sales. What is your net dollar sales projection for this year?

2. Delsing Plumbing Company has beginning inventory of 14,000 units, will sell 50,000 units for the month, and desires to reduce ending inventory to 40 percent of beginning inventory. How many units should Delsing produce?

3. At the end of January, Higgins Data Systems had an inventory of 600 units, which cost $16 per unit to produce. During February the company produced 850 units at a cost of $19 per unit. If the firm sold 1,100 in February, what was its cost of goods sold (assume LIFO inventory accounting)?

4.. Victoria’s Apparel has forecast credits sales for the fourth quarter of the year as:
September (actual) ……………… $50,000
Fourth Quarter
October …………………………………. $40,000
November ……………………………… $35,000
December ………………………………..$60,000
Experience has shown that 20 percent of sales receipts are collected in the month of sale, 70 percent in the following month, and 10 percent are never collected. Prepare a schedule of cash receipts for Victoria’s Apparel covering the fourth quarter (October through December).

5. The Manning Company has financial statements as shown below, which are representative of the company’s historical average. The firm is expecting a 20 percent increase in sales next year, and management is concerned about the company’s need for external funds. The increase is sale is expected to be carried out without any expansion of fixed assets, but rather through more efficient asset utilization. In the existing store. Among liabilities, only current liabilities vary directly with sales. Using the percent-of-sales method, determine whether the company has external financing needs, or a surplus of funds.
Income Statement
Sales $200,000
Expenses 158,000
Earnings before interest and taxes $42,000
Interest 7,000
Earnings before taxes $35,000
Taxes $15,000
Earnings after taxes $20,000
Dividends $6,000

Balance Sheet
Assets
Cash $5,000
Accounts receivable 40,000
Inventory 75,000
Current assets $120,000
Fixed assets 80,000
Total assets 200,000

Liabilities and Stockholders’ Equity
Accounts payable 25,000
Accrued wages 1,000
Accrued taxes 2,000
Current liabilities 28,000
Notes payable 7,000
Long-term debt 15,000
Common Stock 120,000
Retained earnings 30,000
Total liabilities and stockholders’ equity 200,000

Part II

1. What form of partnership allows some of the investors to limit their liability? Explain by giving examples.
2. When does insider trading occur? What government agency is responsible for protecting against the unethical practice of insider trading? Explain by giving examples.
3. Explain how the tax code allows depreciation to contribute to cash flow.
4. Explain why inflation may restrict the usefulness of the balance sheet as normally presented