Question $4($Cash Budget$)$

Global Medical Appliances Limited $($GMAL$)$ manufactures medical appliances for

hospital medical facilities around the world. In the past few years, the company

has been struggling to survive in a highly competitive market. Matthew Moir was

employed as operations director at the beginning of January $2024,$ and he has

discovered that the current manufacturing system is outdated, requiring a

complete overhaul of the manufacturing plant to turn around the fortunes of the

company.

GMAL's board of directors has concluded that they would have to take Matthew

at his word to make use of the latest technology to become more competitive.

They have appointed a renowned marketing company to help promote the

medical appliances, given the expected cost advantage from the business

process re$-$engineering, which could give rise to a more competitive pricing

structure. The marketing costs will be $3,400,000,$ payable over $4$ months in

equal instalments commencing in July $2024.$

Being a medical product that is distributed globally and administered to millions of

people, quality is of cardinal importance to customers. Latest technological

advancements have seen the development of manufacturing and packing machines

capable of operating at very high speeds and equipped with artificial intelligence to

monitor and adjust the manufacturing process to meet the exacting standards

required in the medical appliance industry. Machines of this nature cost $600$ million

and can produce up to $200,000$ appliances per month. These machines can be

leased over $5$ years at a premium of $11\%$ per annum on the purchase price. One

such machine is available and could be installed by the end of June $2024.$ However,

the company has decided to purchase the machine and to raise a $450,000,000$ loan

with the bank, repayable at $9\%$ per annum for $3$ years. The interest and capital

repayments commence in the month of July $2024.$ If the company decides to lease

the machine, then the bank will not advance the $450$ million loan to the company

because the company would be considered to have debt commitments beyond their

ability to service the debt. The bank has indicated that there may be room for a larger

loan up to $470,000,000.$he company has no overdraft facilities at present.

QUESTION CONTINUES ON NEXT PAGE Required:

$($a$)$ Prepare the cash budget for GMAL for the third quarter $($July$-$

September$)$ of $2024.$

$($b$)$ Perform an adjustment to the cash budget to reflect the revised

closing balances for each month that will apply where the

purchase arrangements for the machine are replaced by the

lease of the machine. Show your workings.

$($c$)$ Assuming that the cash balance is insufficient to fund the

project startup working capital and that, by the end of July

there is a negative balance in the closing balance of the cash

budget, what actions could GMAL take to remedy the

situation? Identify three different actions that could see the

cash balance for July turned positive.

$($Total $40$ marks$)$

I need balance sheet for this question