PGBM 01 Financial Management & Control Workshop 7

By

Andy Turton.

andy.turton@sunderland.ac.uk

Cash Receipts

Month 1 Month2 Month 3 Month 4 Month5 Month 6

Sales:

Fair Play 10,000 12,000 13,000 14,000

Dub. Conduct 5,600 8,400 9,800 11,200

Total 15,600 20,400 22,800 25,200

Cash Budget for first 6 months of trade

Cash Payments

Month 1 Month2 Month 3 Month 4 Month5 Month 6

Materials:

Fair Play 3,000 3,600 3,900 4,200 4,800

Dub. Conduct 2,000 3,000 3,500 4,000 5,000

Labour:

Fair Play 2,250 2,700 2,925 3,150 3,600 3,150

Dub. Conduct 1,800 2,700 3,150 3,600 4,500 3,150

Rent 4,000

Leasing 800 800 800 800 800 800

Marketing 1,000 1,000 1,000

Mgmt. Wages 2,000 2,000 2,000 2,000 2,000 2,000

Insurance 2,000

Total 13,850 14,200 16,475 16,950 19,100 18,900

Cash Budget for first 6 months of trade (cont.)

Cash Budget Summary

Month 1 Month2 Month 3 Month 4 Month5 Month 6

Cash b/fwd -13,850 -28,050 -28,925 -25,475 -21,775

Receipts 0 0 15,600 20,400 22,800 25,200

Payments 13,850 14,200 16,475 16,950 19,100 18,900

Cash c/fwd -13,850 -28,050 -28,925 -25,475 -21,775 -15,475

Cash Budget for first 6 months of trade (cont.)

The question states “he will be selling to retail chains who have asked for 60 days credit”. Therefore the demand associated with Month 1 will be turned into cash in Month 3, demand for Month 2 will be turned into cash in Month 4 and so on.

Month 3 Month 4 Month 5 Month 6

Fair Play 1,000 x £10 1,200 x £10 1,300 x £10 1,400 x £10

= £10,000 = £12,000 = £13,000 = £14,000

Dub. Conduct 400 x £14 600 x £14 700 x £14 800 x £14

= £5,600 = £8,400 = £9,800 = £11,200

Cash Receipts Supporting Calculations

The question states “he has managed to negotiate 30 days credit from his material suppliers”. Therefore the materials associated with Month 1 production will have a cash outflow in Month 2, the materials for Month 2 production will have a cash outflow in Month 3 and so on.

Month 2 Month 3 Month 4 Month 5 Month 6

Fair Play 1,000 x £3 1,200 x £3 1,300 x £3 1,400 x £3 1,600 x £3

= £3,000 = £3,600 = £3,900 = £4,200 = £4,800

Dub.Conduct 400 x £5 600 x £5 700 x £5 800 x £5 1,000 x £5

= £2,000 = £3,000 = £3,500 = £4,000 = £5,000

“Note that all other amounts are paid for in the month that they are incurred.”

Cash Payments Supporting Calculations