CASH BUDGET WITH EXPLANATION Budget Information. December 2017 - March 2018 our bank account Assignment 5 Part A THE CASH BUDGET WITH EXPLANATION Millennium Corporation Cash Budget Information - December 2017 - March 2018 Budget Items Total Sales Credit Sales December 1.200.000 1.080.000 January Jar 1.500.000 1.350.000 February 1300000 1,300,000 1.170,000 March 1,400,000 1,260,000 300.000 30.000 15.000 310,000 30,000 16,000 Wages & Salaries Rentals Other Expenses Taxes Paid Dividends Equipment Purchase Cash Balance 325,000 30.000 17.000 150,000 50.000 declared 90,000 ordered 100.000 50,000 paid 90,000 paid Assumptions: 1. The company must maintain a $50,000 cash balance at the end of each month 2.. 30% of credit sales are collected in the month of sale. 3. The credit sales balance is collected one month after the month of sale for each month 4. The company buys 70% of next month sales and these purchases are paid for in the following month 5. April sales is expected to be $1,100,000 Required: Use the template below to show the company receipts and disbursement of cash as per the simulation above And answer the questions that follow. Millennium Corporation Cash Budget Worksheet for First Quarter, 2018 December January February March $1,500,000 1,350,000 Estimated Sales Estimated Credit Sales Estimated Receipts: Cash sales Collections of Accounts Receivable 25% of last month's credit sales 75% of current month credit sales Total Accounts Receivable collections Estimated purchases Estimated payments of accounts lenovo $438,000 payable Cash Budget - First Quarter, 2018 December January February March Sales S SS Projected cash balance beginning of month Receipts: Cash sales Collection of accounts receivable Total cash available Disbursements: Payment of accounts payable Wages and salaries Rent Other expenses Taxes Dividends on common stock Purchase of new equipment Total disbursements Excess of available cash over disbursements Cash loans needed to maintain balance of $100,000 Projected cash balance, end of month Cumulative Net borrowings APLANATION December 2017 - March 2018 scussion Questions: A company must synchronize their receipts of cash to synchronize with their disbursements. Correctly summarize your findings with respect to the synchronization of inflows and outflows of cash in the cash budget tabulated above. From your analysis would you be willing to grant a short term loan of $500,00 to this firm based on an 85% factor? a.. Yes b. No C.. Rationalize you answer for a or b above AGING OF THE ACCOUNT Days Outstanding 1 to 30 31 to 60 61 to 90 91 to 180 TOTAL AMT ($) 61,000 20,000 10,000 9,000 100,000 Days Financing Gap Goods Ordered & Inventoried Account Receivable Payment to Suppliers FINANCING GAP Cost of Foregoing the Payable Discount Disc/(100 - Disc)/ 365 /Contract days - discount days) Let % whole Numbers For Ex. 2/10 net 30 payment term (2/100-2]/[ 365/30 - 10) 2/98 x 365/20 37% Recommendation: borrow at less than 37% and pay within the 10-day period. Therefore, 37% is the opportunity cost alternative to the 2% over 20-day period Try this one - 3/15 net 60 What is the highest % could the business borrow at to take the discount? SOLN: chrome WITH EXPLANATION - Desember 2017 March 2018 oblem on Cash Receipts, Receivables, Credit Financing Month J F M A M J Sales ($N 1.0 1.2 1.5 1.4 1.4 1.2 1.5 Assumptions - 10 % Collected at invoicing - 50% one month after - Remainder 2 months after 1. What is the cash receipt for June 2. What is the receivables in July 3. Would you do a loan of $0.5M in July assuming a factoring of 80%? Why? chro Fart Cast Receipts, Receivables % Credit Month J F M A M Sales ($M 5.0 4.5 5.0 6.0 6.0 5.8 lenovo Assumptions: - 10 % Collected at invoicing - 30% one month after - Remainder 2 months after 1. What is the cash receipt for June 2.. What is the receivables in July 3.. Would you do a loan of $4.0 M in August assuming a factoring of 75%? Why