The correct answer is Option (2) → (A), (C), (B), (D)
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(A) The preparation of a sales forecast. Financial planning starts with a forecast of future operations, with the sales forecast typically being the primary basis, as most other plans (production, expenses) are derived from expected sales revenue.
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(C) The preparation of financial statements. Based on the sales forecast, projected financial statements, such as the income statement and balance sheet, are prepared to estimate future capital requirements and financial position.
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(B) Estimates showing expected profits are made to know how much fund requirements can be met internally. The projected income statement helps estimate future profits, which represent the funds generated internally and available to meet the capital requirements.
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(D) Estimation of the requirement for external funds. By comparing the total capital requirements (from the projected balance sheet) with the funds available internally (from the profit estimates), the management can determine the net shortfall, which must be sourced externally.
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