Workbook FIN430 - Chapter 4 Cash Budget PDF

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PEER-TO-PEER LEARNINGPASTYEARS’WORKSHEETSFIN430 | UiTM CAWANGAN SABAHDECEMBER 2019a) Starmax Inc. is a retailer of kitchen accessories and hardware. The company is estimating its cash requirement for the upcoming months. The following information is available;i) The firm's history and predictions of...

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PEER-TO-PEER LEARNING

PAST YEARS’ WORKSHE ETS

FIN430 | UiTM CAWANGAN SABAH

FIN430 WORKSHEETS | UiTM

TABLE OF CONTENTS Chapter 4: Financial Planning and Forecasting ....................................... December 2019 ..................................................................................................... June 2019 .............................................................................................................. December 2018 ..................................................................................................... June 2018 ..............................................................................................................

STUDENT NAME STUDENT ID

FIN430 WORKSHEETS | UiTM

DECEMBER 2019 a)

Starmax Inc. is a retailer of kitchen accessories and hardware. The company is estimating its cash requirement for the upcoming months. The following information is available; i)

The firm's history and predictions of sales in 2019 and 2020 are as follows; Actual Sales in 2019

Predicted Sales in 2020

Month October November December January February March April May

Sales (RM) 120,000 144,000 168,000 180,000 192,000 204,000 240,000 220,000

ii)

The company is adopting an old sales policy whereby 55 percent of sales on a cash basis. Another 30 percent is to be collected in 1 month after the sales while the remaining 15 percent is to be collected within 2 months after the sales.

iii)

An amount of RM48, 000 dividend income will be received in January 2020.

iv)

The company purchases 60% of materials two months before the anticipated sales. Payment of purchases are 40 percent, which is paid in 1 month following the purchases, and the remaining is to be paid in the next 2 months after purchases.

v)

The company has estimated RM3,000 monthly for their fixed operating cost.

vi)

The monthly wages and salaries is 10 percent of the monthly sales.

vii)

Rental of premises is RM5,000 per month respectively.

viii)

New furniture and fittings will be purchased in February for RM50,000 in cash.

ix)

EPF and SOCSO contribution: RM12,000 per month.

x)

The company's initial cash balance for the month of January is RM12,000 and the company has a policy of maintaining a minimum cash requirement of RM15,000.

Based on the information provided, prepare a cash budget for the first quarter of the year 2020. (14 marks)

FIN430 WORKSHEETS | UiTM [Please use tool like Insert > Table to answer this question]

Starmax Inc. Cash Budget for the first quarter of the year 2020 RM January February Sales 180 000 192 000 Cash Sales (55%) 99 000 105 600 Credit: 1 month (30%) 22680 24300 2 months (15%) 9 720 11 340 Dividend Income 48 000 TOTAL CASH RECEIPTS 179 400 141 240

DISBURSEMENT Purchase of materials (60%) Credit: 1 month (40%) 2 months (60%) Operating cost Wages and salaries Rental Furniture and fittings EPF and SOCSO TOTAL CASH DISBURSEMENT

TOTAL CASH RECEIPTS TOTAL CASH DISBURSEMENT Net cash flow Cash reconciliation Net cash flow (+) Beginning cash balance Ending cash balance (-) Minimum cash balance EXCESS/DEFICIT

March 204 000 112 200 25920 12 150 150 270

January 122 400

February 144 000

March 132 000

46 080 51 840 3 000 18 000 5 000 12 000 135 920

48 960 69 120 3 000 19 200 5 000 50 000 12 000 207 280

57 600 73 440 3 000 20 400 5 000 12 000 171 440

January 179 400 135 920 43 480

February 141 240 207 280 -66 040

March 150 270 171 440 -21 170

43 480 12 000 55 480 15 000 40 480

-66 040 55 480 -10 560 15 000 (25 560)

-21 170 -10 560 -31 730 15 000 (46 730)

FIN430 WORKSHEETS | UiTM

JUNE 2019 a)

Bidara Sdn. Bhd.'s sales from May to October 2019 are tabulated below: Month May June July August September October

Sales (RM) 500,000 360,000 340,000 440,000 350,000 420,000

i)

30 percent of the firm's monthly sales are on cash whilst the remaining sales are on credit, which are collected equally in the two subsequent months of sales.

ii)

The raw materials for monthly sales are purchased one month prior to sales and it amounts to 30 percent of the monthly sales. 40 percent of the purchases is paid in the month of purchase and the balance is paid equally in two months following the purchases.

iii)

Employees' salaries are 10 percent of the monthly sales. The firm pays half- yearly RM30,000 of cash bonuses to its employees in January and July, respectively.

iv)

The firm pays property rental expenses of RM25,000 monthly and receives RM15,000 dividend from its marketable securities in September every year.

v)

Financing cost of RM12,000 is due in September and other miscellaneous expenses amount to RM5,000 is estimated to be paid every month.

vi)

Fully depreciated machines are to be replaced in August and its cost is expected to be RM100,000.

vii)

The firm's cash balance at end of June is RM50,000 and it maintains RM25,000 minimum cash monthly.

You are required to prepare the cash budget of Bidara Sdn. Bhd. for the third quarterof 2019 based on the financial information given above. (14 marks)

FIN430 WORKSHEETS | UiTM [Please use tool like Insert > Table to answer this question] Bidara Sdn. Bhd Cash Budget for the third quarter of 2019 RM

July

August

September

Sales

340 000

440 000

350 000

Cash sales (30%)

102 000

132 000

105 000

1 month (50%)

126 000

119 000

154 000

2 months (50%)

175 000

126 000

119 500

Dividend income

-

-

15 000

TOTAL CASH RECEIPTS

403 000

377 000

393 500

July 132 000

August 105 000

September 126 000

40 800 64 800 34 000 30 000 25 000 5 000 199 600

52 800 61 200 44 000 25 000 5 000 100 000 288 000

42 000 79 200 35 000 25 000 12 000 5 000 198 200

July 403 000 199 600 203 400

August 377 000 288 000 89 000

September 393 500 198 200 195 300

203 400 50 000 253 400 25 000 228 400

89 000 253 400 342 400 25 000 317 400

195 300 342 400 537 700 25 000 512 700

Credit:

DISBURSEMENT Purchase of materials (30%) Credit: 1 month (40%) 2 months (60%) Salaries Cash Bonuses Rental Financing cost Miscellaneous expenses Depreciation TOTAL CASH DISBURSEMENT

TOTAL CASH RECEIPTS TOTAL CASH DISBURSEMENT Net cash flow Cash reconciliation Net cash flow (+) Beginning cash balance Ending cash balance (-) Minimum cash balance EXCESS/DEFICIT

FIN430 WORKSHEETS | UiTM

DECEMBER 2018 a)

Armada Sdn Bhd's sales from December 2018 to May 2019 are shown as follows: Month Actual Sales Forecasted Sales

December, 2018 January, 2019 February, 2019 March, 2019 April, 2019 May, 2019

Sales (RM '000) 250 180 170 220 175 210

You are required to prepare the first-quarter cash budget of Armada Sdn Bhd for theyear 2019 based on the following information: i)

The firm generates 40 percent of cash sales. The credit sales normally will be collected on an equal amount in each of the two months following the sales.

ii)

The firm purchases raw materials one month in advance before sales which the purchases are approximately 40 percent of the monthly sales. The firm will pay its suppliers 50 percent of the purchases a month after and the balance is made two months after the purchases.

iii)

The firm is expected to receive rental payment of RM32,000 in February and RM11,000 in April 2019.

iv)

Salaries paid to employees are 15 percent of the previous month's sales.

v)

Rental expenses of RM12,000 per month are expected to be paid. However, the firm is expected to receive a 5 percent discount on the rental expenses in March 2019.

vi)

Interest expenses of RM6,400 are due in January and March 2019.

vii)

Cash bonuses to the employees of RM14,000 are expected to be disbursed in February 2019.

viii)

The firm plans to buy a new equipment by cash amounted to RM120,000 in February.

ix)

The firm has a cash balance of RM25,000 on December 31, 2018 wishing to hold a monthly minimum cash of RM13,000 for liquidity purpose.

(14 marks)

FIN430 WORKSHEETS | UiTM [Please use tool like Insert > Table to answer this question]

Armada Sdn. Bhd Cash Budget for the first quarter of 2019 RM

January

February

March

Sales

180 000

170 000

220 000

Cash sales (40%)

72 000

68 000

88 000

1 month (50%)

75 000

54 000

51 000

2 months (50%)

-

75 000

54 000

Rental Income

-

32 000

-

TOTAL CASH RECEIPTS

147 000

229 000

193 000

January 68 000

February 88 000

March 70 000

36 000 50 000 37 500 12 000 6 400 141 900

34 000 36 000 27 000 12 000 14 000 120 000 243 000

44 000 34 000 25 500 11 400 6 400 121 300

January 147 000 141 900 5100

February 229 000 243 000 -14 000

March 193 000 121 300 71 700

5100 25 000 30 100 13 000 17 100

-14 000 30 100 16 100 13 000 3 100

71 700 16 100 87 800 13 000 74 800

Credit:

DISBURSEMENT Purchase of materials (40%) Credit: 1 month (50%) 2 months (50%) Salaries Rental Interest expenses Cash bonuses Equipment TOTAL CASH DISBURSEMENT

TOTAL CASH RECEIPTS TOTAL CASH DISBURSEMENT Net cash flow Cash reconciliation Net cash flow (+) Beginning cash balance Ending cash balance (-) Minimum cash balance EXCESS/DEFICIT

FIN430 WORKSHEETS | UiTM

JUNE 2018 a)

The following information is collected from XXX Database on February 2018.

Legacy Corporation Balance Sheet as at 31st December 2017 (RM '000) CURRENT ASSETS CURRENT LIABILITIES Cash 130 Accounts payable Marketable securities 500 Notes payable Accounts receivable 950 Accruals Inventories 400 Other current liabilities

FIXED ASSETS Gross Property, plant and equipment Less: depreciation Net Property, plant and equipment

TOTAL ASSETS

LONG TERM LIABILITIES 4520 Long-term borrowings (1,000 (unsecured) ) SHAREHOLDERS 3,52 EQUITY 0 Common stock Retained Earnings 550 0

TOTAL LIABILITIES & EQUITIES

510 270 150 650

2,000

320 1,600 5500

Legacy Corporation, in year 2017, has generated sales volume of RM15 million and the volume is expected to increase by 30 percent in next year. The net profit margin and dividend payout ratio for 2018 is expected to be similar to 2017. In 2017, the net profit margin and total dividend payout were 6 percent and RM90,000, respectively. Using the percent to sales method and assuming that the company is operating at full capacity, you are required to construct a pro-forma balance sheet for the year 2018 to estimate the amount of external (additional) funds needed. (14 marks)

FIN430 WORKSHEETS | UiTM [Please use tool like Insert > Table to answer this question] Legacy Corporation Pro-forma balance sheet for the year 2018 Initial

Forecasted

Changes

Cash

130

169

39

Marketable securities

500

650

150

Accounts receivable

950

1 235

285

Inventories

400

520

120

Total current assets

1 980

2 574

594

Net fixed assets

3 520

4 576

1 056

TOTAL ASSETS

5 500

7 150

1 650

Account payable

510

663

153

Notes payable

270

270

-

Accruals

150

195

45

Other current liabilities

650

845

195

Total current liabilities

1 580

1 973

393

Long term borrowings

2 000

2 000

-

Common stock

320

320

-

Retained earnings

1 600

2 653

1 053

AFN

-

204

-

TOTAL CLAIM

5 500

7 150

-

Retained earnings

=1 600 + (19 500) (0.06) (1-0.1)

=2 653 Sale (new) =15 000 x (1 + 0.3) =19 500 DPR =90 000 / 900 000 =0.1 0.06 = x / 15 000 x

= 900 000...