1-

 A negative value implies that the company has excess cash above its desired minimum. You can confirm this on the balance sheet by setting the external financing requirement to zero and adding the figure for external financing required to cash. You will find that assets equal liabilities plus owners’ equity in this circumstance; in other words, the balance sheet balances.

2-

Historical analysis helps decide for which financial statement items a percent-of-sales forecast might be appropriate. For example, a stable trend in the collection period would tell you that, unless you expect changes in the management of the accounts receivable, future collection periods should continue along this trend.

3-

This would tell me I had erred in constructing one or both of the forecasts. Using the same assumptions and avoiding accounting and arithmetic errors, estimated external financing required should equal estimated cash surplus or deficit for the same date.

11-

a- Negative numbers for taxes mean the company’s tax liability will fall by this amount. If the company does not have an accrued tax liability but has paid taxes in the recent past, it can file for a rebate of past taxes paid.      

b- Cash balances exceed the minimum required level because the company has excess cash in these quarters. Cash balances are determined in these periods by first noting that external financing required is negative when cash is set at the minimum level. External financing required is then set to zero and cash becomes the balancing item equating assets to liabilities and owners’ equity.

c- When greater than zero, external financing required becomes the balancing item equating assets to liabilities and owners’ equity.     

d- The company should easily be able to borrow the money. The amounts required are less than one-quarter of accounts receivable in each quarter.