Q1. Prepare Quartly Cash Budget for Q1, Q2, Q3, and Q4 ending December 31, 2021.

ALMA.com is an e-commerce service for teenagers' video games, television programs, and other material, intended to be both educational and enjoyable. Valuable product information and detailed review comments are combined with a wide selection of products for purchase to help families make their children's educational and entertainment decisions. A team of leading educators and experts provide reviews and comments on the products sold by the firm. ALMA.com targets highly educated, convenience- oriented, and value-conscious families with children under the age of fifteen, estimated to be about 40 percent of Internet users. The firm is using a warehouse distribution model and channels that stems higher net margins, as well as greater selection and convenience for customers, when compared to traditional retailers and competitors. Venture capital of $1M was obtained to start up operations in 2020; a second round of venture financing of $0.14M (capital lease of warehouse facilities) helped ALMA.com to move through its survival stage. Because of relatively high marketing expenditures aimed at gaining market share, the firm is expected to suffer net losses for the first two years 2020 and 2021. However, net profit margins are expected to average 12% per year beginning in Year 2022. The management team is headed by Ms. Alma Serah, who serves as the president of the venture and controls about 35% of the ownership of the firm. Ms. Serah has more than twenty years of experience in high-tech industries, including previous positions with prestigious corporations such as Microsoft. She holds a Bachelor Degree in Electrical Engineering and a Master Degree in Computer Engineering from top educational institutions in the world. Nelma Bradman, director of technology, has more than twelve years of experience in software development and integration. Dalma Loman has almost ten years of experience in business development and sales in the software industry. Salma Norman, director of marketing, was responsible for the marketing communications function and the Internet operations of a large software company for nine years. Management strives for continual improvement in ease of user interface, personalized services, and amount of information supplied to customers. ALMA.com balance sheet as of the end of 2020 is expected to be as follows: ALMA.com Balance Sheet as of December 31, 2020 (In Millions) Cash 0.15 Accounts payable 0.17 Accounts receivable 0.47 Capital Lease Liability* 0.14 Inventories 0.55 Total Liabilities Net fixed assets* 0.14 Equity 1.00 Total assets $1.31 Total Liabilities and Equity $1.31 * Represents the capital lease of tools and equipment (warehouse facilities) After discussions with the company's marketing manager and finance manager, sales over each quarter of 2021 are forecasted to be: Quarter Sales Forecast (in Millions) Q1 $ 0.50 Q2 $0.75 Q3 $ 0.85 Q4 $0.90 Total $3.00 0.31 All sales are made on credit terms of net 90 days and are collected the following quarter. No bad debts are anticipated. The accounts receivable on the balance sheet at the end of 2020 thus will be collected in Quarter 1, 2021. Quarter 1, 2021 sales will be collected in Quarter 2, and so on. Inventory on hand represents a minimum operating level (safety stock), which the company intends to maintain. ALMA.com's policy is to maintain ending inventory at the end of each quarter equals to 30% of next quarter's expected sales. Purchases are paid 60% in the same quarter and 40% in the next quarter. Cost of goods sold averages 70% of sales (gross profit margin 30%). General, Administration and Selling cash expenses average 10% of sales. Depreciation is $0.01M per Quarter. The annual interest rate on outstanding lease liability is 5%. Interest expense is paid quarterly. Ms Alma Serah assumes taxes are paid quarterly and the income tax rate is 40% for budgeting purposes. The capital lease installment is 0.08M per Year (0.02 per quarter). There are no additional capital expenditures planned during 2021, and no equity payouts will be paid. The company's desired end-of- quarter minimum cash balance is $0.15M. Ms Serah hopes to meet any cash shortages during the period by an agreed $0.15M openline of credit with the bank at 4%. Ms. Alma Serah is planning to leverage equity capital with debt during the years 2022, 2023 and 2024. She is keen to know whether ALMA.com will add economic value. Therefore, in order to assess the effects of its leveraging debt strategy, ALMA.com prepared a projected Statement of Financial Position (Balance Sheet) and Income Statement for the years 2022, 2023 and 2024 based on certain assumptions and events that are likely to happen in the future. The interest rate on capital lease is 5%. The average expected interest rate on the bank loan during 2022 - 2024 is 4%. For long-term debt, the real interest rate is estimated to be 3%; the inflation premium is 4%; and ALMA.com's default/liquidity risk premium over government bonds is estimated to be 5%. The cost of common equity was estimated using the risk-free long-term government bond rate plus investment risk premium of 5.8%. The income tax rate = 40%. Following are the projected statements of income and financial position for 2022, 2023 and 2024: Alma.com Projected Statement of Income (2022 - 2024) INCOME STATEMENT 2022 2023 2024 Revenues $3.44M $7.50M $12.30M Cost of Goods Sold 2.55 5.20 8.72 Gross Profit 0.89 3.30 3.58 General and Marketing Expenses 0.26 0.34 0.36 Research and Development 0.05 0.05 0.05 Depreciation 0.06 0.09 0.12 EBIT 0.57 1.87 3.05 Interest Expense 0.07 0.11 0.18 EBT 0.50 1.76 2.87 Income Taxes 0.20 0.70 1.15 Net Income (Loss) 0.30 1.06 1.72 Alma.com Projected Statement of Financial Position (2022 - 2024) BALANCE SHEET 2022 2023 2024 Cash $ 1.15 M $ 1.87 M $ 3.95 M Accounts Receivable 0.35 1.00 1.50 Inventories 0.50 0.48 1.40 Total Current Assets 2.00 3.35 6.85 Net fixed assets* 0.15 0.35 0.57 Total Assets 2.15 3.70 7.42 Accounts payable 0.44 0.59 1.13 Accrued Liabilities 0.16 0.38 0.52 Total Current Liabilities 0.60 0.97 1.65 Capital Lease Liability* 0.13 0.30 0.60 Bank Loan 0.12 0.45 0.70 Long-Term Debt 0.20 0.50 Total Non-Current Liabilities 0.45 1.25 2.80 Total Liabilities 1.05 2.22 4.45 Venture Capital 1.00 1.00 1.00 Additional Paid-in Capital 0 0.30 0 Retained Earnings 0.10 0.18 1.97 Total Equity 1.10 1.48 2.97 Total Liabilities and Equity 2.15 3.70 7.42 *Represents the capital lease of tools and equipment (warehouse facilities) 1.50 denna Formula: Purchase Budget = cost of sales + ending inventory- beginning inventory 2021 Sales Forecast (in millions) 0.5 0.75 0.85 0.9 Purchase Budget 0.425 0.555 Quarter Q1 Q2 Q3 04 total 2022 Q1 ending inventory 0.225 0.255 0.27 0.36 1.11 cost of sales 0.35 0.525 0.595 0.63 2.1 beginning inventory 0.15 0.225 0.255 0.27 Payment of Purchase Budget 0.425 0.503 0.588 0.61 0.72 0.676 2.192 3 0.9 2.31 1 1.2 ni m 0 1 U Precasted to be: in 2 Quarter Q1 Q2 Q3 Sales Forecast (in Millions) $ 0.50 $ 0.75 $ 0.85 $0.90 $ 3.00 2 3 1 5 Q4 Total U 7 General, Administration and Selling cash exp per Quarter. The annual interest rate on outstanding Ms Alma Serah assumes taxes are paid quarterly and The capital lease installment is 0.08M per Year expenditures planned during 2021, and no equityp quarter minimum cash balance is $0.15M. Ms Serah by an agreed $0.15M open line of credit with the bar Sales Forecast (in millions) 0.5 0.75 0.85 Quarter Q1 Q2 Q3 Q4 total 0.9 3 UI 3 Q1 Q2 Q3 Q4 total 0.05 0.3 0.075 0.02 0.02 0.085 0.02 0.105 0.09 0.02 0.11 0.08 0.38 0.07 0.095 General Administration and Selling expenses capital lease installment 1 administration and selling budge 2 3 Depreciation 4 interest expense 5 income tax 0.01 0.00175 0.3 0.01 0.0018 0.3 0.01 0.01 0.0018 0.00175 0.3 0.3 0.04 0.007 1.2 6 7 8 9 0 1 2 3 4 5 6 ALMA.com Balance Sheet as of December 31, 2020 (In Millions) Cash 0.15 Accounts payable Accounts receivable 0.47 Capital Lease Liability* Inventories 0.55 Total Liabilities Net fixed assets* 0.14 Equity Total assets $1.31 Total Liabilities and Equity *Represents the capital lease of tools and equipment (warehouse facilities) 0.17 0.14 0.31 1.00 $1.31 8 9 ALMA.com is an e-commerce service for teenagers' video games, television programs, and other material, intended to be both educational and enjoyable. Valuable product information and detailed review comments are combined with a wide selection of products for purchase to help families make their children's educational and entertainment decisions. A team of leading educators and experts provide reviews and comments on the products sold by the firm. ALMA.com targets highly educated, convenience- oriented, and value-conscious families with children under the age of fifteen, estimated to be about 40 percent of Internet users. The firm is using a warehouse distribution model and channels that stems higher net margins, as well as greater selection and convenience for customers, when compared to traditional retailers and competitors. Venture capital of $1M was obtained to start up operations in 2020; a second round of venture financing of $0.14M (capital lease of warehouse facilities) helped ALMA.com to move through its survival stage. Because of relatively high marketing expenditures aimed at gaining market share, the firm is expected to suffer net losses for the first two years 2020 and 2021. However, net profit margins are expected to average 12% per year beginning in Year 2022. The management team is headed by Ms. Alma Serah, who serves as the president of the venture and controls about 35% of the ownership of the firm. Ms. Serah has more than twenty years of experience in high-tech industries, including previous positions with prestigious corporations such as Microsoft. She holds a Bachelor Degree in Electrical Engineering and a Master Degree in Computer Engineering from top educational institutions in the world. Nelma Bradman, director of technology, has more than twelve years of experience in software development and integration. Dalma Loman has almost ten years of experience in business development and sales in the software industry. Salma Norman, director of marketing, was responsible for the marketing communications function and the Internet operations of a large software company for nine years. Management strives for continual improvement in ease of user interface, personalized services, and amount of information supplied to customers. ALMA.com balance sheet as of the end of 2020 is expected to be as follows: ALMA.com Balance Sheet as of December 31, 2020 (In Millions) Cash 0.15 Accounts payable 0.17 Accounts receivable 0.47 Capital Lease Liability* 0.14 Inventories 0.55 Total Liabilities Net fixed assets* 0.14 Equity 1.00 Total assets $1.31 Total Liabilities and Equity $1.31 * Represents the capital lease of tools and equipment (warehouse facilities) After discussions with the company's marketing manager and finance manager, sales over each quarter of 2021 are forecasted to be: Quarter Sales Forecast (in Millions) Q1 $ 0.50 Q2 $0.75 Q3 $ 0.85 Q4 $0.90 Total $3.00 0.31 All sales are made on credit terms of net 90 days and are collected the following quarter. No bad debts are anticipated. The accounts receivable on the balance sheet at the end of 2020 thus will be collected in Quarter 1, 2021. Quarter 1, 2021 sales will be collected in Quarter 2, and so on. Inventory on hand represents a minimum operating level (safety stock), which the company intends to maintain. ALMA.com's policy is to maintain ending inventory at the end of each quarter equals to 30% of next quarter's expected sales. Purchases are paid 60% in the same quarter and 40% in the next quarter. Cost of goods sold averages 70% of sales (gross profit margin 30%). General, Administration and Selling cash expenses average 10% of sales. Depreciation is $0.01M per Quarter. The annual interest rate on outstanding lease liability is 5%. Interest expense is paid quarterly. Ms Alma Serah assumes taxes are paid quarterly and the income tax rate is 40% for budgeting purposes. The capital lease installment is 0.08M per Year (0.02 per quarter). There are no additional capital expenditures planned during 2021, and no equity payouts will be paid. The company's desired end-of- quarter minimum cash balance is $0.15M. Ms Serah hopes to meet any cash shortages during the period by an agreed $0.15M openline of credit with the bank at 4%. Ms. Alma Serah is planning to leverage equity capital with debt during the years 2022, 2023 and 2024. She is keen to know whether ALMA.com will add economic value. Therefore, in order to assess the effects of its leveraging debt strategy, ALMA.com prepared a projected Statement of Financial Position (Balance Sheet) and Income Statement for the years 2022, 2023 and 2024 based on certain assumptions and events that are likely to happen in the future. The interest rate on capital lease is 5%. The average expected interest rate on the bank loan during 2022 - 2024 is 4%. For long-term debt, the real interest rate is estimated to be 3%; the inflation premium is 4%; and ALMA.com's default/liquidity risk premium over government bonds is estimated to be 5%. The cost of common equity was estimated using the risk-free long-term government bond rate plus investment risk premium of 5.8%. The income tax rate = 40%. Following are the projected statements of income and financial position for 2022, 2023 and 2024: Alma.com Projected Statement of Income (2022 - 2024) INCOME STATEMENT 2022 2023 2024 Revenues $3.44M $7.50M $12.30M Cost of Goods Sold 2.55 5.20 8.72 Gross Profit 0.89 3.30 3.58 General and Marketing Expenses 0.26 0.34 0.36 Research and Development 0.05 0.05 0.05 Depreciation 0.06 0.09 0.12 EBIT 0.57 1.87 3.05 Interest Expense 0.07 0.11 0.18 EBT 0.50 1.76 2.87 Income Taxes 0.20 0.70 1.15 Net Income (Loss) 0.30 1.06 1.72 Alma.com Projected Statement of Financial Position (2022 - 2024) BALANCE SHEET 2022 2023 2024 Cash $ 1.15 M $ 1.87 M $ 3.95 M Accounts Receivable 0.35 1.00 1.50 Inventories 0.50 0.48 1.40 Total Current Assets 2.00 3.35 6.85 Net fixed assets* 0.15 0.35 0.57 Total Assets 2.15 3.70 7.42 Accounts payable 0.44 0.59 1.13 Accrued Liabilities 0.16 0.38 0.52 Total Current Liabilities 0.60 0.97 1.65 Capital Lease Liability* 0.13 0.30 0.60 Bank Loan 0.12 0.45 0.70 Long-Term Debt 0.20 0.50 Total Non-Current Liabilities 0.45 1.25 2.80 Total Liabilities 1.05 2.22 4.45 Venture Capital 1.00 1.00 1.00 Additional Paid-in Capital 0 0.30 0 Retained Earnings 0.10 0.18 1.97 Total Equity 1.10 1.48 2.97 Total Liabilities and Equity 2.15 3.70 7.42 *Represents the capital lease of tools and equipment (warehouse facilities) 1.50 denna Formula: Purchase Budget = cost of sales + ending inventory- beginning inventory 2021 Sales Forecast (in millions) 0.5 0.75 0.85 0.9 Purchase Budget 0.425 0.555 Quarter Q1 Q2 Q3 04 total 2022 Q1 ending inventory 0.225 0.255 0.27 0.36 1.11 cost of sales 0.35 0.525 0.595 0.63 2.1 beginning inventory 0.15 0.225 0.255 0.27 Payment of Purchase Budget 0.425 0.503 0.588 0.61 0.72 0.676 2.192 3 0.9 2.31 1 1.2 ni m 0 1 U Precasted to be: in 2 Quarter Q1 Q2 Q3 Sales Forecast (in Millions) $ 0.50 $ 0.75 $ 0.85 $0.90 $ 3.00 2 3 1 5 Q4 Total U 7 General, Administration and Selling cash exp per Quarter. The annual interest rate on outstanding Ms Alma Serah assumes taxes are paid quarterly and The capital lease installment is 0.08M per Year expenditures planned during 2021, and no equityp quarter minimum cash balance is $0.15M. Ms Serah by an agreed $0.15M open line of credit with the bar Sales Forecast (in millions) 0.5 0.75 0.85 Quarter Q1 Q2 Q3 Q4 total 0.9 3 UI 3 Q1 Q2 Q3 Q4 total 0.05 0.3 0.075 0.02 0.02 0.085 0.02 0.105 0.09 0.02 0.11 0.08 0.38 0.07 0.095 General Administration and Selling expenses capital lease installment 1 administration and selling budge 2 3 Depreciation 4 interest expense 5 income tax 0.01 0.00175 0.3 0.01 0.0018 0.3 0.01 0.01 0.0018 0.00175 0.3 0.3 0.04 0.007 1.2 6 7 8 9 0 1 2 3 4 5 6 ALMA.com Balance Sheet as of December 31, 2020 (In Millions) Cash 0.15 Accounts payable Accounts receivable 0.47 Capital Lease Liability* Inventories 0.55 Total Liabilities Net fixed assets* 0.14 Equity Total assets $1.31 Total Liabilities and Equity *Represents the capital lease of tools and equipment (warehouse facilities) 0.17 0.14 0.31 1.00 $1.31 8 9