cash budget, Corporate Finance

Assignment Help:
You have been asked to prepare a cash budget for Whitborrow plc for the next three months, October, November and December. The Managers are concerned that they may not have sufficient cash to pay for a £150,000 investment in equipment in December. The overdraft has reached its limit £70,000 at the present time - the end of September. Sales during September were a total of £400,000 of which £55,000 was received in cash. £165,000 is expected to be paid on October, with the remainder likely to flow in during November. Sales for the next three months are as follows:

Total sales Cash sales Credit sales

October 450,000 90,000 360,000

November 550,000 110,000 440,000

December 700,000 140,000 560,000

There is a gross profit margin of 40 percent on sales. All cost (materials, labour and other) are paid for on receipt. Only 20 percent of customer sales are expected to be paid for in the month f delivery. A further 70 percent will be paid after one month and the remainder after two months. Labour and other costs amount to 10 percent of sales. Debtor levels at the end of September are £400,000 and the investment in stock is £350,000

Required:

a. Prepare a cash budget for October, November and December, and state if the firm will be able to purchase the new equipment.

b. Recommend action that could be taken to improve the working capital position of Whitborrow.

Related Discussions:- cash budget

Estimate the sufficient taxable income, L has business assets worth $8 mill...

L has business assets worth $8 million and NOL carryovers of $1 million expiring in 14 years and of $2 million expiring in 15 years. 100% of L's stock is worth $10 million. The l

Can the goal of maximizing the value of the stock co, Ask qCan the goal of ...

Ask qCan the goal of maximizing the value of the stock conflict with other goals such as avoiding unethical or illegal behavior? In particular, do subjects like customer and employ

Describe reasons for corporate restructuring, 1. Describe three different...

1. Describe three different types of Mergers, and in what circumstances you expect to see each type occurring. 2. Just as Acquisitions and Mergers are a means by which compan

Bond valuation, An investor buys a French government, 10-year bond, paying ...

An investor buys a French government, 10-year bond, paying annual coupon of 4.5%. Face value = 1000. The investor is unsure of his investment horizon and considers 5 horizons: 5, 6

Mmtheory, the departure from Modigliani-Miller proposition using the agency...

the departure from Modigliani-Miller proposition using the agency cost and information asymmetry theory of capital structure

Review the existing legislation regulating banks entities, The Minister of ...

The Minister of Finance decides to review the existing legislation regulating banks and non-banking entities. You have been appointed as Advisor to the Minister to work on the pro

Julianne., Project is to write paper on financial analysis & business analy...

Project is to write paper on financial analysis & business analysis of COTT Corporation. 1st draft, financial analysis as it applies to COTT. 2nd draft Financial analysis & Executi

Compare the financial system of the mauritius and usa, Question : (a) ...

Question : (a) Compare the financial system of the Mauritius and USA. Give differences between the two systems. (b) One of the facilities given by the financial system is

Forecasting methods, In this paper, we propose new forecasting methods base...

In this paper, we propose new forecasting methods based on advance demand information, and perform a case study to compare them to existing ones based on advance demand information

EBIT, Firm A has $10,000 in assets entirely financed with equity. Firm B al...

Firm A has $10,000 in assets entirely financed with equity. Firm B also has $10,000 in assets, but these assets are financed by $5,000 in debt (with a 10 percent rate of interest)

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd