Question
Powerhouse Fitness Pte Ltd is a retailer of gym equipment with a retail shop at Velocity Novena Square. As at 1 October 2021, the cash
Powerhouse Fitness Pte Ltd is a retailer of gym equipment with a retail shop at Velocity Novena Square. As at 1 October 2021, the cash at bank balance is $300,000. The companys policy is to maintain a minimum cash balance of $150,000.
Powerhouse Fitness Pte Ltd is developing a cash budget for October, November and December 2021, and the following information was gathered:
| Cash Receipts | |
| 1 | Sales revenue for August and September 2021 are $150,000 and $200,000 respectively. The forecasted sales revenue for October, November and December 2021 are $190,000, $280,000 and $300,000 respectively.
Historically, 70% of the firms sales are in cash, 20% are collected in the next month, and the remaining 10% are collected in the second month following the sale. |
| 2 | Monthly commission income is received from the wholesaler based on C% of the current months sale (C is the 6th digit of your admin number).
(Use 6% if the 6thdigit of your admin number is 0) |
| 3 | Dividend income of $15,000 will be received in December 2021. |
| Cash Disbursements | |
| 4 | The expected purchases are $120,000, $150,000 and $170,000 for the months of October, November and December 2021 respectively. The company pays all its purchases in the month of purchase. |
| 5 | Salaries paid monthly is $D0,000. (D is the 7th digit of your admin number)
(Use $70,000 if the 7thdigit of your admin number is 0) |
| 6 | Rental of $10,000 is paid monthly. |
| 7 | Investment in a joint venture amounting to $500,000 is scheduled in December 2021. |
Use the following templates to prepare the cash budget for October, November and December 2021:
a) Projected Cash Receipts
| Receipts | Aug $ | Sep $ | Oct $ | Nov $ | Dec $ |
| Sales | 150,000 | 200,000 | 190,000 | 280,000 | 300,000 |
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| Cash sales (70%) |
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| Lag 1 month (20%) |
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| Lag 2 months (10%) |
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| Commission income (C%) |
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| Dividend income |
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| Total Cash Receipts |
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b) Projected Cash Disbursements
| Disbursements | Oct $ | Nov $ | Dec $ |
| Cash purchase |
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| Salaries ($D0,000) |
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| Rental payment |
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| Investment |
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| Total Cash Disbursements |
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c) Cash Budget
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| Oct $ | Nov $ | Dec $ |
| Total cash receipts |
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| Less: Total cash disbursements |
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| Net cash flow |
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| Add: Beginning cash |
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| Ending cash |
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| Minimum cash |
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| Required Financing |
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| Excess Cash Balance |
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Financial Management For Public Health And Not-for-Profit Organizations
Authors: Steven A. Finkler, Daniel L. Smith, Thad D. Calabrese, Robert M. Purtell
7th Edition
1071835335, 978-1071835333
