Cash Flow-case Study
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Transcript of Cash Flow-case Study
Cash book
Month 1 2 3 4 5 6
Opening cash balance 350,000 350,000 (400,000) 550,000 550,000 1,000,000
Cash sale 500,000 1,700,000 500,000 1,200,000 2,300,000
Cash expense (500,000) (750,000) (750,000) (500,000) (750,000) (250,000)
Net cash flow - (750,000) 950,000 - 450,000 2,050,000
Closing cash balance 350,000 (400,000) 550,000 550,000 1,000,000 3,050,000
Stock-chart
Month 1 2 3 4 5 6
Opening - 5,000 13,000 13,000 16,000 16,000
Production 10,000 15,000 15,000 10,000 15,000 5,000
Selling (5,000) (7,000) (15,000) (7,000) (15,000) (20,000)
Closing 5,000 13,000 13,000 16,000 16,000 1,000
Profit
Month 1 2 3 4 5 6
Opening profit 250,000 500,000 850,000 1,600,000 1,950,000 2,700,000
Profit in the month 250,000 350,000 750,000 350,000 750,000 1,000,000
Closing profit 500,000 850,000 1,600,000 1,950,000 2,700,000 3,700,000
Total expense each pack 50
Profit per pack 50
7
3,050,000
700,000
700,000
3,750,000
At the start of this growing season she had $3,000 in the bank.
SEEDS Finacial Planning
Mapping all the figures on a table
Input
Plant area 40.00
Productivity 8.50
Sales price 100.00
Support budget 25.00
Month September
1. Opening balance 3,000
2. Cash in (Total) 0
Sales 0
3. Cash out (Total) (1,950)
buys and plants seeds -1000
buys fertiliser 0
Pays herself -450
for assistance -500
pays rent 0
Taxes 0
4. Net Cash flow (=Total Cash in-Total cash out) (1,950)
5. Closing balance (=(1)+(4)) 1,050
Profit from planting rapes (=2-3) -1,950
Profit of this season 24,000
2.The farmerA farmer grows rape seed on her farm. She has 40 hectares of usable land. She expects a yield of 8.5 tons/hectare and
should receive $100 cash per ton from the buyer, and $25 per tonne as a subsidy payment from the EU Agricultural
Support budget. She grows one crop per year, which she sells in August. In September she buys and plants seeds, 4 tons
at a price of $250 per ton. She buys fertiliser in November and March; 15 tons each time at $80 per ton. She pays herself
$450 per month and also pays $500 four times each year for assistance in seeding September, fertilising and reaping in
November, March and August. She pays rent of $1,500 in January, April, July and October, and taxes of $1,700 in May.
All transactions are in cash.
Question 1: profit that she expects to make this season is $24000
Question 2: She needs arrange an overdraft with her banker because her budget is declined from October from current year to July of next year
Question 3: She needs an overdraft from October of current year to July of next year
She needs a max overdraft is $-14550 . The overdraft should be made in the first disbursement from October of current year
with the amount of disbursement under above time line from October of current year to July of next year to save borrowing interest.
Unit
Hectares
per Hectare
Ton
Ton
October November December
1,050 (900) (3,050)
0 0 0
0 0 0
(1,950) (2,150) (450)
0 0 0
0 -1200 0
-450 -450 -450
0 -500 0
-1500 0 0
0 0 0
(1,950) (2,150) (450)
(900) (3,050) (3,500)
-1,950 -2,150 -450
2.The farmerA farmer grows rape seed on her farm. She has 40 hectares of usable land. She expects a yield of 8.5 tons/hectare and
should receive $100 cash per ton from the buyer, and $25 per tonne as a subsidy payment from the EU Agricultural
Support budget. She grows one crop per year, which she sells in August. In September she buys and plants seeds, 4 tons
at a price of $250 per ton. She buys fertiliser in November and March; 15 tons each time at $80 per ton. She pays herself
$450 per month and also pays $500 four times each year for assistance in seeding September, fertilising and reaping in
November, March and August. She pays rent of $1,500 in January, April, July and October, and taxes of $1,700 in May.
All transactions are in cash.
Question 2: She needs arrange an overdraft with her banker because her budget is declined from October from current year to July of next year
Question 3: She needs an overdraft from October of current year to July of next year
She needs a max overdraft is $-14550 . The overdraft should be made in the first disbursement from October of current year
with the amount of disbursement under above time line from October of current year to July of next year to save borrowing interest.
January February March
(3,500) (5,450) (5,900)
0 0 0
0 0 0
(1,950) (450) (2,150)
0 0 0
0 0 -1200
-450 -450 -450
0 0 -500
-1500 0 0
0 0 0
(1,950) (450) (2,150)
(5,450) (5,900) (8,050)
-1,950 -450 -2,150
April May Jun
(8,050) (10,000) (12,150)
0 0 0
0 0 0
(1,950) (2,150) (450)
0 0 0
0 0 0
-450 -450 -450
0 0 0
-1500 0 0
0 -1700 0
(1,950) (2,150) (450)
(10,000) (12,150) (12,600)
-1,950 -2,150 -450
July August
(12,600) (14,550)
0 42,500
0 42,500
(1,950) (950)
0 0
0 0
-450 -450
0 -500
-1500 0
0 0
(1,950) 41,550
(14,550) 27,000
-1,950 41,550
Cash Flow from overheads
Month 1 2
1. Opening balance 36,000.00$ 20,250.00$
2. Cash in (Total) -$ -$
Sales -$ -$
3. Cash out (Total) 15,750.00$ 14,750.00$
Overdraft -$
Rent office 3,000.00$ 3,000.00$
Furniture 1,000.00$
Cars 1,000.00$ -$
Rates, Insurance etc 1,000.00$ 1,000.00$
Tax -$ -$
Services 250.00$ 250.00$
Salaries and expenses 9,500.00$ 9,500.00$
Sundries -$ 1,000.00$
4. Net Cash flow (=Total Cash in-Total cash out) (15,750.00)$ (14,750.00)$
5. Closing balance (=(1)+(4)) 20,250.00$ 5,500.00$
Cash Flow from purchases and sales
Period 1.00$ 2.00$
1. Opening balance -$ 7,000.00$
2. Cash in (Total) 15,000.00$ 24,000.00$
Sales 15,000.00$ 24,000.00$
Account receivables
3. Cash out (Total) 8,000.00$ 15,000.00$
Purchases 8,000.00$ 15,000.00$
4. Net Cash flow (=Total Cash in-Total cash out) 7,000.00$ 9,000.00$
5. Closing balance (=(1)+(4)) 7,000.00$ 16,000.00$
Cash Flow
Period 2 months After
1. Opening balance 36,000.00$ (78,500.00)$
2. Cash in (Total) 54,000.00$ 141,000.00$
Wholesale Phone Ltd
Sales 54,000.00$
Account receivables 141,000.00$
3. Cash out (Total) 168,500.00$ 16,468.00$
overheads 30,500.00$
purchases and sales 138,000.00$ -$
Account payable 16,468.00$
4. Net Cash flow (=Total Cash in-Total cash out) (114,500.00)$ 124,532.00$
5. Closing balance (=(1)+(4)) (78,500.00)$ 46,032.00$
Opening banking balance (credit) (12,468.00)$
(90,968.00)$
After 2 months, CF is $-78500
He had set up an overdraft limit of $80.000 with the bank, that was not enough, the opening banking balance is $-12468 so that the overdraft limit has larger $-90968
=> he has every right to be worried, very worried!
Wholesale Phones Ltd
Three shareholders, Sandra, Sumira and Ranjit, have just set up a small company that buys mobile phones from Asia and the sells them to wholesalers in Europe. Marketing and selling is done using the Internet. When they started trading, Ranjit the Accountant, arranged an overdraft with the Bank for $100,000. They had also deposited $36,000 in cash in return for the initial share issue.
The early weeks were very hard, but the market was growing. Sales were very good, and all the owners' efforts were put into buying and selling. Credit control was ignored, and Ranjit let the work on the cash flow forecast slip.
The owners are in the boardroom when the receptionist interrupts them.
'Ranjit, phone the Bank Manager at once. Unless you talk to her, she will call our overdraft in.'
'What is she on about', said Sandra, 'does that mean I will have to cancel the order for my BMW?'
Ranjit went to his office. He had not really checked the cash position for two months.
He was a little worried. His records showed the following.
Opening bank balance - $12,468 credit
Overheads
Rent: Office $3,000 per month. Both months paid.
Furniture: $1,000 per month. One month paid.
Cars: $1,000 per month. One month paid.
Rates, Insurance etc: $1,000 per month. Both months paid.
Tax: $500 per month. None paid.
Services: $250 per month. Both months paid.
Salaries and expenses: $9,500 per month. Both months paid.
Sundries: $1,000 per month. One month paid.
Sales
Period 1: $15,000 All paid for.
Period 2: $24,000 All paid for.
Period 3: $30,000 Half paid for.
Period 4: $40,000 No payments received.
Period 5: $86,000 No payments received.
Purchases
Period 1: $8,000 Paid.
Period 2: $15,000 Paid.
Period 3: $15,000 Paid.
Period 4: $55,000 Paid.
Period 5: $45,000 Paid.
Was he right to be worried, and will Sandra get her car? He had set up an overdraft limit of $80,000 with the bank. Surely that was enough?
After
5,500.00$
-$
-$
16,468.00$
12,468.00$
-$
1,000.00$
1,000.00$
-$
1,000.00$
-$
-$
1,000.00$
(16,468.00)$
(10,968.00)$
3.00$ 4.00$ 5.00$ After
16,000.00$ 16,000.00$ (39,000.00)$ (84,000.00)$
15,000.00$ -$ -$ 141,000.00$
15,000.00$ -$ -$ -$
141,000.00$
15,000.00$ 55,000.00$ 45,000.00$ -$
15,000.00$ 55,000.00$ 45,000.00$ -$
-$ (55,000.00)$ (45,000.00)$ 141,000.00$
16,000.00$ (39,000.00)$ (84,000.00)$ 57,000.00$
He had set up an overdraft limit of $80.000 with the bank, that was not enough, the opening banking balance is $-12468 so that the overdraft limit has larger $-90968
Three shareholders, Sandra, Sumira and Ranjit, have just set up a small company that buys mobile phones from Asia and the sells them to wholesalers in Europe. Marketing and selling is done using the Internet. When they started trading, Ranjit the Accountant, arranged an overdraft with the Bank for $100,000. They had also deposited $36,000 in cash in return for the initial share issue.
The early weeks were very hard, but the market was growing. Sales were very good, and all the owners' efforts were put into buying and selling. Credit control was ignored, and Ranjit let the work on the cash flow forecast slip.
Was he right to be worried, and will Sandra get her car? He had set up an overdraft limit of $80,000 with the bank. Surely that was enough?
Three shareholders, Sandra, Sumira and Ranjit, have just set up a small company that buys mobile phones from Asia and the sells them to wholesalers in Europe. Marketing and selling is done using the Internet. When they started trading, Ranjit the Accountant, arranged an overdraft with the Bank for $100,000. They had also deposited $36,000 in cash in return for the initial share issue.
The early weeks were very hard, but the market was growing. Sales were very good, and all the owners' efforts were put into buying and selling. Credit control was ignored, and Ranjit let the work on the cash flow forecast slip.
Three shareholders, Sandra, Sumira and Ranjit, have just set up a small company that buys mobile phones from Asia and the sells them to wholesalers in Europe. Marketing and selling is done using the Internet. When they started trading, Ranjit the Accountant, arranged an overdraft with the Bank for $100,000. They had also deposited $36,000 in cash in return for the initial share issue.
Chart 1 : purchase,stock and sales
Week1 Week2 Week3
Purchases -$ 100.00$ -$
Sales by cash -$ -$ 50.00$
Sales 2 weeks credit 20.00$
Sales 3 weeks credit
Stock -$ 100.00$ 30.00$
profit 1 product -$
Chart 2: Cash flow statement
Week1 Week2 Week3
1. Opening balance 100,000.00$ 99,700.00$ 38,750.00$
2. Cash in (Total) -$ -$ 50,000.00$
Sales by cash -$ -$ 50,000.00$
Sales 2 weeks credit -$
Sales 3 weeks credit
3. Cash out (Total) 300.00$ 60,950.00$ 300.00$
Rent office 300.00$ 300.00$ 300.00$
Purchases computers 60,000.00$
Pay an insurance 650.00$
Pay wages
4. Net Cash flow (=Total Cash in-Total cash out) (300.00)$ (60,950.00)$ 49,700.00$
5. Closing balance (=(1)+(4)) 99,700.00$ 38,750.00$ 88,450.00$
Chart 3: Profit Statement
Week1 Week2 Week3
Turn over -$ -$ 70,000.00$
Cost for goods sold -$ 60,000.00$ -$
Over head 300.00$ 950.00$ 300.00$
Profit (300.00)$ (60,950.00)$ 69,700.00$
Total Profit 143,850.00$
The computer business
Week4 Week5 Week6 Week7 Week8 Week9 Week10
200.00$ -$ 200.00$ -$ 200.00$ -$ 200.00$
20.00$ 30.00$ 50.00$ 30.00$ 40.00$
50.00$ 50.00$ 80.00$ 60.00$ 20.00$
160.00$ 80.00$ 280.00$ 200.00$ 350.00$ 260.00$ 400.00$
Week4 Week5 Week6 Week7 Week8 Week9 Week10
88,450.00$ 8,150.00$ 57,850.00$ (44,950.00)$ 4,750.00$ 14,450.00$ 44,150.00$
20,000.00$ 50,000.00$ -$ 50,000.00$ 100,000.00$ 30,000.00$ 120,000.00$
20,000.00$ 30,000.00$ -$ -$ 50,000.00$ 30,000.00$ 40,000.00$
-$ 20,000.00$ -$ -$ -$ -$ -$
-$ -$ -$ 50,000.00$ 50,000.00$ -$ 80,000.00$
100,300.00$ 300.00$ 102,800.00$ 300.00$ 90,300.00$ 300.00$ 300.00$
300.00$ 300.00$ 300.00$ 300.00$ 300.00$ 300.00$ 300.00$
100,000.00$ 100,000.00$ 90,000.00$
2,500.00$
(80,300.00)$ 49,700.00$ (102,800.00)$ 49,700.00$ 9,700.00$ 29,700.00$ 119,700.00$
8,150.00$ 57,850.00$ (44,950.00)$ 4,750.00$ 14,450.00$ 44,150.00$ 163,850.00$
Week4 Week5 Week6 Week7 Week8 Week9 Week10
70,000.00$ 80,000.00$ -$ 80,000.00$ 50,000.00$ 90,000.00$ 60,000.00$
100,000.00$ -$ 100,000.00$ -$ 90,000.00$ -$ -$
300.00$ 300.00$ 2,800.00$ 300.00$ 300.00$ 300.00$ 300.00$
(30,300.00)$ 79,700.00$ (102,800.00)$ 79,700.00$ (40,300.00)$ 89,700.00$ 59,700.00$
1 month credit
Market Mike
Month 1 2 3 4
1. Opening balance (750.00)$ (780.00)$ (820.00)$ (1,560.00)$
2. Cash in (Total) 1,480.00$ 1,530.00$ 1,730.00$ 1,670.00$
Sales 1,480.00$ 1,530.00$ 1,580.00$ 1,670.00$
Sales old stall 150.00$
3. Cash out (Total) 1,510.00$ 1,570.00$ 2,470.00$ 1,960.00$
Purchases 890.00$ 1,040.00$ 1,190.00$
Payable 830.00$
Personal drawings 500.00$ 500.00$ 500.00$ 500.00$
Purchases new stall 750.00$
Rent of the market stall patch 180.00$ 180.00$ 180.00$ 270.00$
Total cash out:
4. Net Cash flow (=Total Cash in-Total cash out) (30.00)$ (40.00)$ (740.00)$ (290.00)$
5. Closing balance (=(1)+(4)) (780.00)$ (820.00)$ (1,560.00)$ (1,850.00)$
5 6
(1,850.00)$ (2,120.00)$
1,760.00$ 2,140.00$
1,760.00$ 2,140.00$
2,030.00$ 2,120.00$
1,260.00$ 1,350.00$
500.00$ 500.00$
270.00$ 270.00$
(270.00)$ 20.00$
(2,120.00)$ (2,100.00)$
loan form bank this number from 1st month
Chart 1 : purchase,stock and sales
Week1 Week2 Week3
Purchases 0 100 0
Sales 0 0 70
Stock 0 100 30
profit 1 product 0
Chart 2: Cash flow statement
Week1 Week2 Week3
Opening $100,000 $99,700 $38,750
Sales 0 0 $50,000
Cost $300 $60,950 $300
Closing $99,700 $38,750 $88,450
Chart 3: Profit Statement
Week1 Week2 Week3turn over $0 $0 $70,000cost for goods sold $0 $0 $42,000Over head $300 $950 $300
Profit ($300) ($950) $27,700
$233,850
The computer business
Week4 Week5 Week6 Week7 Week8
200 0 200 0 200
70 80 0 80 50
160 80 280 200 350
Week4 Week5 Week6 Week7 Week8
$88,450 $8,150 $57,850 ($44,950) $4,750
$20,000 $50,000 0 $50,000 $100,000
$100,300 $300 $102,800 $300 $90,300
$8,150 $57,850 ($44,950) $4,750 $14,450
Week4 Week5 Week6 Week7 Week8$70,000 $80,000 $0 $80,000 $50,000$38,000 $40,000 $0 $40,000 $25,000
$300 $300 $2,800 $300 $300
$31,700 $39,700 ($2,800) $39,700 $24,700
Week9 Week10
0 200
90 60
260 400
Week9 Week10
$14,450 $44,150 $163,850
30000 $120,000
$300 $300 120300
$44,150 $163,850 $43,550
Week9 Week10$90,000 $60,000$45,000 $30,000
$300 $300
$44,700 $29,700
Month -3 -2
Sales forecast
Assembled forecast 10 30
Materials 10,000.00$
Labour 2,000.00$
Overheads 100,000.00$
Cost of each car 12,000.00$
Selling price 25,000.00$
Cash flow forecast
Month 1 2
1. Opening balance 1,000,000.00$ (4,520,000.00)$
2. Cash in (Total) -$ -$
Sales 2 months credit
3. Cash out (Total) 5,520,000.00$ 11,400,000.00$
Parts and materials 5,100,000.00$ 10,000,000.00$
Labour 20,000.00$ 1,000,000.00$
Overheads 400,000.00$ 400,000.00$
4. Net Cash flow (=Total Cash in-Total cash out) (5,520,000.00)$ (11,400,000.00)$
5. Closing balance (=(1)+(4)) (4,520,000.00)$ (15,920,000.00)$
Profit forecast
Month 1 2
Turn over 250,000.00$ 750,000.00$
4.Ecocity Cars Ltd
Cost for goods sold 120,000.00$ 360,000.00$
Over head 400,000.00$ 400,000.00$
Profit (270,000.00)$ (10,000.00)$
Total Profit 21,520,000.00$
6 months of sales
-1 1 2 3 4 5
10 30 100 200 500
100 200 500 1,000 1,200 1,400
3 4 5 6
(15,920,000.00)$ (30,070,000.00)$ (46,120,000.00)$ (62,820,000.00)$
250,000.00$ 750,000.00$ 2,500,000.00$ 5,000,000.00$
250,000.00$ 750,000.00$ 2,500,000.00$ 5,000,000.00$
14,400,000.00$ 16,800,000.00$ 19,200,000.00$ 3,600,000.00$
12,000,000.00$ 14,000,000.00$ 16,000,000.00$ -$
2,000,000.00$ 2,400,000.00$ 2,800,000.00$ 3,200,000.00$
400,000.00$ 400,000.00$ 400,000.00$ 400,000.00$
(14,150,000.00)$ (16,050,000.00)$ (16,700,000.00)$ 1,400,000.00$
(30,070,000.00)$ (46,120,000.00)$ (62,820,000.00)$ (61,420,000.00)$
3 4 5 6
2,500,000.00$ 5,000,000.00$ 12,500,000.00$ 25,000,000.00$
1,200,000.00$ 2,400,000.00$ 6,000,000.00$ 12,000,000.00$
400,000.00$ 400,000.00$ 400,000.00$ 400,000.00$
900,000.00$ 2,200,000.00$ 6,100,000.00$ 12,600,000.00$
6 7 8 9 Total
1,000 1,200 1,400 1,600 6,040
1,600 - - 6,040