Financial Management
| Table 3 | |||||
| Beginning | Production | Sales | Ending | Inventory | |
| Month | inventory | for the month | Inventory | $2000/unit | |
| Oct | 400 | 400 | 150 | 650 | 1300000 |
| Nov | 650 | 400 | 75 | 975 | 1950000 |
| Dec | 975 | 400 | 25 | 1350 | 2700000 |
| Jan | 1350 | 400 | 0 | 1750 | 3500000 |
| Feb | 1750 | 400 | 0 | 2150 | 4300000 |
| Mar | 2100 | 400 | 300 | 2200 | 4400000 |
| Apr | 2200 | 400 | 500 | 2100 | 4200000 |
| May | 2100 | 400 | 1000 | 1500 | 3000000 |
| Jun | 1500 | 400 | 1000 | 900 | 1800000 |
| July | 900 | 400 | 1000 | 300 | 600000 |
| Aug | 300 | 400 | 500 | 200 | 400000 |
| Sep | 200 | 400 | 250 | 350 | 700000 |
| 28850000 |
(Kaplan and Bruns, 1987)
| A) | Oct | Nov | Dec | Jan | Feb | Mar |
| Sales (units) | 150 | 75 | 25 | – | – | 300 |
| Sales (units price: $3000) | 450,000 | 225,000 | 75,000 | – | – | 900,000 |
| Cash receipts Schedule | ||||||
| 50% Cash | 225,000 | 112,500 | 37,500 | – | – | 450,000 |
| 50% prior month sales | 375,000 | 225,000 | 112,500 | 37,500 | – | – |
| Total cash | 600,000 | 337,500 | 150,000 | 37,500 | – | 450,000 |
| Cash payments Schedule | ||||||
| Production in units | 400 | 400 | 400 | 400 | 400 | 400 |
| production costs (@ $2000) | 800,000 | 800,000 | 800,000 | 800,000 | 800,000 | 800,000 |
| Overheads | 200,000 | 200,000 | 200,000 | 200,000 | 200,000 | 200,000 |
| Dividends and interests | 5,500 | 12,125 | 20,625 | 31,750 | 41,750 | 47,250 |
| Taxes | 150,000 | – | – | 150,000 | – | – |
| Total cash payments | 1,155,900 | 1,012,525 | 1,021,025 | 1,182,150 | 1,042,150 | 1,047,650 |
| Cash Budget (required minimum balance: $125,000) | ||||||
| Cash Flow | (555,900) | (675,025) | (871,025) | (1,144,650) | (1,042,150) | (597,650) |
| Beginning Cash | 125,000 | 125,000 | 125,000 | 125,000 | 125,000 | 125,000 |
| Cumulative cash balance | (425,000) | (537,500) | (725,000) | (987,500) | (875,000) | (425,000) |
| Monthly loan repayment | 550,000 | 662,500 | 850,000 | 1,112,500 | 1,000,000 | 550,000 |
| Cumulative loan | 550,000 | 1,212,500 | 2,062,500 | 3,175,000 | 4,175,000 | 4,725,000 |
| Ending cash balance | 125,000 | 125,000 | 125,000 | 125,000 | 125,000 | 125,000 |
| C) | Cash payments Schedule | |||||
| Production in units | 400 | 400 | 400 | 400 | 400 | 400 |
| production costs (@ $2000) | 800,000 | 800,000 | 800,000 | 800,000 | 800,000 | 800,000 |
| Overheads | 200,000 | 200,000 | 200,000 | 200,000 | 200,000 | 200,000 |
| Dividends and interests | 5,500 | 12,125 | 20,625 | 31,750 | 41,750 | 47,250 |
| Sales Expenses | 2,250 | |||||
| Taxes | 150,000 | – | – | 150,000 | – | – |
| Total cash payments | 1,158,150 | 1,012,525 | 1,021,025 | 1,182,150 | 1,042,150 | 1,047,650 |
| Cash Budget (required minimum balance: $125,000) | ||||||
| Cash Flow | (558,150) | (675,025) | (871,025) | (1,144,650) | (1,042,150) | (597,650) |
| Beginning Cash | 125,000 | 125,000 | 125,000 | 125,000 | 125,000 | 125,000 |
| Cumulative cash balance | (425,000) | (537,500) | (725,000) | (987,500) | (875,000) | (425,000) |
| Monthly loan repayment | 550,000 | 662,500 | 850,000 | 1,112,500 | 1,000,000 | 550,000 |
| Cumulative loan | 550,000 | 1,212,500 | 2,062,500 | 3,175,000 | 4,175,000 | 4,725,000 |
| Ending cash balance | 125,000 | 125,000 | 125,000 | 125,000 | 125,000 | 125,000 |
Reference.
Kaplan, R. S. and Bruns (1987) Accounting and Management: A Field Study Perspective
Harvard Business School Press.
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