a. Prepare an estimate of cash position for three months from April to June. b. Based on the budget prepared, evaluate the cash position of the company, give your comments and provide suitable suggestion to the management on effective cash management.
a. Prepare an estimate of cash position for three months from April to June. b. Based on the budget prepared, evaluate the cash position of the company, give your comments and provide suitable suggestion to the management on effective cash management.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Imagine you are the finance manager of Al Mohsin Company. The company management feels that the cash management of the company should be made more effective. The following information from the company’s records is available to you:
Business Studies Department, University of Technology & Applied Sciences (UTAS) Ministry of Manpower,
Outcomes for the Assignment: Graduate Attributes Covered:
Student ID : Name:
Section No:1
Month Sales
February 40,000 March 55,000 April 60,000 May 74,000 June 90,000
Additional Information
Purchase Wages
20,000 7,000 14,000 8,000 28,000 9,000 30,000 9,000 32,000 8,800
Miscellaneous expenses 1,000 3,000 2,000 2,000 3,500
1. Al Mohsin LLC expects to have RO 8,000 cash balance at the beginning of April.
2. Period of credit allowed by suppliers – 2 months
3. 40% of the total sale is for cash. Half of the credit sale is collected in the next month of sale and
the remaining half in the following month after that.
4. Delay in payment of wages 1/4 month
5. Delay in payment of expenses 1/2 month
6. Income tax to be paid in the month of June RO 1,500.
You are required to :
a. Prepare an estimate of cash position for three months from April to June.
b. Based on the budget prepared, evaluate the cash position of the company, give your comments
and provide suitable suggestion to the management on effective cash management.
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