b. Masculine Man Clothing has required you to prepare a cash budget for July 2020 on the basis of following projection: 1. Sales for June was RM300,000. The company expects sales of RM400,000 for July. The company has observed that 25% of its sales is for cash and that the remaining 75% is collected in the following month. 2. The company's raw materials cost is 70% of sales. Usually 70% of purchases are paid cash on the same month of sales and the remaining 30% of purchases is paid in the following month. Salaries are RM135,000 per month, lease payments are RM35,000 per month, and depreciation charges are RM20,000 per month. 3. The company has ending balance from June amounting RM50,000 and company must maintain a minimum reserved of RM25,000. Required: Prepare a cash budget for Masculine Man Clothing and identify how much money must the company borrow in July?

b. Masculine Man Clothing has required you to prepare a cash budget for July 2020 on the basis of following projection: 1. Sales for June was RM300,000. The company expects sales of RM400,000 for July. The company has observed that 25% of its sales is for cash and that the remaining 75% is collected in the following month. 2. The company's raw materials cost is 70% of sales. Usually 70% of purchases are paid cash on the same month of sales and the remaining 30% of purchases is paid in the following month. Salaries are RM135,000 per month, lease payments are RM35,000 per month, and depreciation charges are RM20,000 per month. 3. The company has ending balance from June amounting RM50,000 and company must maintain a minimum reserved of RM25,000. Required: Prepare a cash budget for Masculine Man Clothing and identify how much money must the company borrow in July?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 5P

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A companys sales for the coming months are as follows: About 20 percent of sales are cash sales, and the remainder are credit sales. The company finds that typically 10 percent of a months credit sales are paid in the month of sale, 70 percent are paid the next month, and 15 percent are paid in the second month after sale. Expected cash receipts in July are budgeted at what amount? a. 114,520 b. 143,150 c. 145,720 d. 156,000
CASH BUDGETING Helen Bowers, owner of Helens Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2019 and 2020: Estimates regarding payments obtained from the credit department are as follows: collected within the month of sale, 10%; collected the month following the sale, 75%; collected the second month following the sale, 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials: General and administrative salaries are approximately 27,000 a month. Lease payments under long-term leases are 9,000 a month. Depreciation charges are 36,000 a month. Miscellaneous expenses are 2,700 a month. Income tax payments of 63,000 are due in September and December. A progress payment of 180,000 on a new design studio must be paid in October. Cash on hand on July 1 will be 132,000, and a minimum cash balance of 90,000 should be maintained throughout the cash budget period. a. Prepare a monthly cash budget for the last 6 months of 2019. b. Prepare monthly estimates of the required financing or excess fundsthat is, the amount of money Bowers will need to borrow or will have available to invest. c. Now suppose receipts from sales come in uniformly during the month (that is, cash receipts come in at the rate of 1/30 each day), but all outflows must be paid on the 5th. Will this affect the cash budget? That is, will the cash budget you prepared be valid under these assumptions? If not, what could be done to make a valid estimate of the peak financing requirements? No calculations are required, although if you prefer, you can use calculations to illustrate the effects. d. Bowers sales are seasonal, and her company produces on a seasonal basis, just ahead of sales. Without making any calculations, discuss how the companys current and debt ratios would vary during the year if all financial requirements were met with short-term bank loans. Could changes in these ratios affect the firms ability to obtain bank credit? Explain.
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