Summary - Financial Management 332 (Finman332)

COMPONENT 1 – CASH BUDGETS
PROBLEM 1 – CASH BUDGETING


Cash receipts
Dec Jan Feb
Sales 4 000 000 1 000 000 1 500 000
Total 4 000 000 1 000 000 1 500 000


Cash payments
Dec Jan Feb
Purchases 3 500 000 1 000 000 1 000 000
Rent 50 000 50 000 50 000
Salary 120 000 120 000 120 000
Property tax 300 000
Total 3 970 000 1 170 000 1 170 000


Cash budget
Dec Jan Feb
Total cash receipts 4 000 000 1 000 000 1 500 000
Total cash payments 3 970 000 1 170 000 1 170 000
Cash generated 30 000 (170 000) 330 000
Cash opening 10 000 40 000 (130 000)
Cash closing 40 000 (130 000) 200 000

Advice:
- Obtain financing for the deficit in January (Bank overdraft, ST loan)
- Arrange for purchases to be paid off over a longer period of time

,CLASS EXERCISE– CASH BUDGETING

The following cash budget is given to you:




• The company requires a closing cash balance of R10 000 at the end of each year.
• Assume that all cash deficits will be financed by means of short-term loans.
• Any cash surpluses will first be used to redeem the previous years’ financing.
• Any additional cash surpluses that may remain can then be utilised to purchase
marketable securities.




Year 1: Obtain ST loan of R40 000
Year 2: Obtain ST loan of R10 000
Year 3: Reduce ST loan by R45 000
Year 4: Reduce ST loan by R5 000 + buy marketable securities of R35 000

,PROBLEM 2 - CASH BUDGETING

Sales 60% during month, 30% following month, 10% 2 months after

Nov: 250 000 – (250 000 x 10%) = 225 000
Des: 450 000 – (450 000 x 10%) = 405 000
Jan: 200 000 – (200 000 x 10%) = 180 000
Feb: 250 000 – (250 000 x 10%) = 225 000
Mar: 300 000 – (300 000 x10%) = 270 000

2.1
KONTANT ONTVANGSTES
JAN FEB MAR
CASH RECEIPTS
Nov 22 500
Des 121 500 40 500
Jan 108 000 54 000 18 000
Feb 135 000 67 500
Mar 162 000
252 000 229500 247 500

JAN FEB MAR
Expected sales 200 000 250 000 300 000
Shoplifting (20 000) (25 000) (30 000)
Realised Sales 180 000 225 000 270 000

Current month: 60% 108 000 135 000 162 000
Next month: 30% 121 500 54 000 67 500
Two months: 10% 22 500 40 500 18 000
Total cash sales 252000 229500 247500

Purchases = (cost of sales + CB inventory) – OB inventory

Dec Purchases = [(70% x 450 000) + (30% x 450 000)] – (30% x 250 000)
= 375 000 (next 60% = 225 000 Jan)

Jan Purchases = [(70% x 200 000) + (30% x 200 000)] – (30% x 250 000)
= 65 000 (cur 40% =26 000 Jan) (next 60% =39 000 Feb)

Feb Purchases = (70% x 250 000) + (30% x 250 000)] – (30% x 200 000)
= 190 000 (cur 40% =76 000 Feb) (next 60% =114 000 Mar)

Mar Purchases = [(70% x 300 000) + (30% x 300 000)] – (30% x 250 000)
=225 000 (cur 40% = 90 000 Mar)

, KONTANT BETALINGS
JAN FEB MAR
CASH PAYMENTS
Purchases
Current month: 40% 26 000 76 000 90 000
Following month: 60% 225 000 39 000 114 000
Operating expenses 24 000 24 000 24 000
Equipment 20 000
Interest 25 000
Income tax 35 000
Total Cash Payments 295 000 164 000 263 000



JAN FEB MAR
Dec 375 000 225 000
Jan 65 000 26 000 39 000
Feb 190 000 76000 114 000
Mar 225 000 90 000
251 000 115 000 204 000


JAN FEB MAR
Total cash receipts 252 000 229 500 247 500
Total cash payments 295 000 164 000 263 000
Cash Generated (43 000) 65 500 (15 500)
Cash opening balance 40 000 (3 000) 62 500
Cash closing balance (3 000) 62 500 47 000


2.2
JAN FEB MAR
Cash receipts 252 000 229 500 247 500
Cash payments 295 000 164 000 263 000
Cash generated (43 000) 65 500 (15 500)
Cash: opening balance 40 000 20 000 20 000
Cash available (3 000) 85 500 4 500
Bank overdraft 23 000 (23 000)
Marketable securities - (42 500) 15 500
Cash: Closing Balance 20 000 20 000 20 000