Forecasted CASH Budget Examples PDF

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Summary

The example was meant for Bachelors' students....

Description

Illustration Paige (U) ltd, a tear gas company is expected to make the following sales from the month of January to March 2017. January February March April May June 60,000,000 80,000,000 100,000,000 200,000,000 120,000,000 160,000,000 20% of the total sales were cash sales and the debtors will be expected to settle their bills as follows; 60% of credit sales in the month following sales and 40% will be collected two months after. Paige (U) ltd expects to spend 25Millions on salaries monthly, 15millions on rent, and 6millions on utilities. The company also plans to acquire a delivery van of 70millions in the month of April and May 2017 and its depreciation for the year is 12millions. The company acquired a long term loan from Crane Bank Uganda in July last year and paying 3millions monthly as repayment amount. Sales for the month of November and December 2016 were 70millions and 50millions respectively and the firm’s had a bank overdraft at the end of December worth 45millions. The company has a policy of maintaining a minimum cash balance of 10millions Shillings at any one time. Required Prepare a cash budget for the period of January to June 2017 and advise Paige (U) ltd accordingly. Solutions Note: the percentage distribution from the collections and cash sales is more than 100% and therefore, our collection percentages will be subjected to total credit sales value (total sales – cash sales).

Details Receipts Cash sales 20% Collections 60% Collections 40% Total Receipt Expenditures Salaries Rent Loan Repayment Utilities Delivery Van Total Expenses Net Cash Bal Opening CB Closing CB

    

Jan

Feb

March

April

May

June

12,000,000 24,000,000 22,400,000 58,400,000

16,000,000 28,800,000 16,000,000 60,800,000

20,000,000 38,400,000 19,200,000 77,600,000

40,000,000 48,000,000 25,600,000 113,600,000

24,000,000 96,000,000 32,000,000 152,000,000

32,000,000 57,600,000 64,000,000 153,600,000

25,000,000 15,000,000 3,000,000 6,000,000 0 49,000,000

25,000,000 15,000,000 3,000,000 6,000,000 0 49,000,000

25,000,000 15,000,000 3,000,000 6,000,000 0 49,000,000

25,000,000 15,000,000 3,000,000 6,000,000 70,000,000 119,000,000

25,000,000 15,000,000 3,000,000 6,000,000 70,000,000 119,000,000

25,000,000 15,000,000 3,000,000 6,000,000 0 49,000,000

9,400,000 -45,000,000 -35,600,000

11,800,000 -35,600,000 -23,800,000

28,600,000 -23,800,000 4,800,000

-5,400,000 4,800,000 -600,000

33,000,000 -600,000 32,400,000

104,600,000 32,400,000 137,000,000

Advise to Paige (U) Ltd Sell some idle assets to raise more funds to cater for the month of January and February short fall. Borrow mid-term loan Post pone capital expenditure in the month of April The firm should negotiate for favourable credit terms from suppliers in the month of March. Invest the surplus in short term securities to earn returns for shareholders in May and June.

Illustration Two Kiplimo and company (U) ltd deals in sports ware and scholastic materials, they have been in the business for the past five years. The company runs without a professional financial adviser and has requested your services as a student of finance to prepare the forecasted cash budget for the next half a year and advice where necessary. The forecasted sales for the company are given as below;

January 80,000,000

February 120,000,000

March 200,000,000

April 160,000,000

May 120,000,000

June 140,000,000

Other information provided includes the following; a) Only 10% of sales are made on cash basis and the rest on credit. The company collects 60% of sales the month following sales and 30% is collected two months after sales. b) The following are the monthly expenditures the company incurs; 2million shillings is spent on Utilities, 3millions on rent, 20millions on salaries, 3millions on maintenance and 10millions on fuel. c) Kiplimo and company (U) ltd purchases office consumables worth 5% of sales every month and these purchases are paid for one month after acquisition/usage. d) The company plans to contribute 5million shillings towards the construction of a regional stadium in eastern Uganda in the month of March. e) The company pays quarterly tax deposits of 15millions in the month of March and June. f) The company plans to procure a bus worth 180million payable in three equal from February to April. g) In the month of November and December, sales were recorded as 100,000,000 and 110,000,000 shillings respectively h) The company had cash at hand worth 15million shillings at the end of December. i) Depreciation cost for the six month is estimated to be 22million shillings j) It is the company policy to have at least 30millions at the end of each month. Required a) Prepare the forecasted cash budget for Kiplimo and company (U) Ltd for the period from January to June. b) Advice Kiplimo and company management accordingly. Solutions to Kiplimo and Company (U) Ltd Note: the percentage distribution from the collections and cash sales is equivalent to 100 and therefore, our collection percentages will be subjected to total sales value.

Jan Receipts Cash Sales (10%) Collections (60%) Collections (30%) Expenditures Office consumables Utilities Rent Salaries Maintenance Fuel Contribution/donation Purchase of a bus Tax deposits Total Expenditures

Feb

March

April

May

June

8,000,000 66,000,000 30,000,000 104,000,000

12,000,000 48,000,000 33,000,000 93,000,000

20,000,000 72,000,000 24,000,000 116,000,000

16,000,000 120,000,000 36,000,000 172,000,000

12,000,000 96,000,000 60,000,000 168,000,000

14,000,000 72,000,000 48,000,000 134,000,000

5,500,000 2,000,000 3,000,000 20,000,000 3,000,000 10,000,000 0 0 0 43,500,000

4,000,000 2,000,000 3,000,000 20,000,000 3,000,000 10,000,000 0 60,000,000 0 102,000,000

6,000,000 2,000,000 3,000,000 20,000,000 3,000,000 10,000,000 5,000,000 60,000,000 15,000,000 124,000,000

10,000,000 2,000,000 3,000,000 20,000,000 3,000,000 10,000,000 0 60,000,000 0 108,000,000

8,000,000 2,000,000 3,000,000 20,000,000 3,000,000 10,000,000 0 0 0 46,000,000

6,000,000 2,000,000 3,000,000 20,000,000 3,000,000 10,000,000 0 0 15,000,000 59,000,000

Cash Reconciliation Opening Balance Net Cash Balance Closing Balance

-55,000,000 60,500,000 5,500,000

5,500,000 -9,000,000 -3,500,000

-3,500,000 -8,000,000 -11,500,000

-11,500,000 64,000,000 52,500,000

52,500,000 122,000,000 174,500,000

174,500,000 75,000,000 249,500,000

Advice 1. Dispose-off idle fixed assets to raise more funds to attend to the deficit experienced for the first three month 2. Explore short term borrowing possibilities payable from April 3. Defer some payment on the bus to the last three months 4. Defer the contribution to June when the company is financially well 5. Invest excess cash obtained during the month of May and June in short term securities like treasury bills and fixed deposits....