Budget Report: Cash Budget, Funding Sources, Ratio Analysis, and Variable Budget for Gaia Ltd

This budget report includes a cash budget analysis, funding sources and their advantages and disadvantages, ratio calculations and their impacts on the organization, and a variable budget for Gaia Ltd. It also discusses specific issues faced by the organization. The report suggests that the organization needs to work on reducing costs to improve profitability, balance debt and equity, and improve liquidity. It also recommends that the organization should focus on better payment policies to keep cash flows positive and avoid sudden jumps.

BUDGET REPORT

Table of Contents
Part: A..............................................................................................................................................3
Cash budget:................................................................................................................................3
Examining cash budget and advising the directors:....................................................................3
Sources of funding and their advantages, disadvantages:...........................................................3
Part: B..............................................................................................................................................5
1) Ratio calculations:...................................................................................................................5
2) comparison of different rations and their impacts on the organization:..................................5
Part: C..............................................................................................................................................6
1) Variable budget for the Gaia ltd..............................................................................................6
2) Specific issues with Gaia ltd.-.................................................................................................6
REFERENCES................................................................................................................................8

Part: A
Cash budget:
Month
April May June July August September
cash balance
at beginning 77290000 82990000 82690000 83890000 74190000 77495000
cash sales
82,500,000 85,500,000 90,000,000 92,000,000 99,000,000 120,000,000
cash from
trade
receivables 4,200,000 4,200,000 4,200,000 4,300,000 4,305,000 4,400,000
cash paid to
creditors -72,000,000 -80,500,000 -84,000,000 -87,000,000 -91,000,000 -93,000,000
cash paid to
the
borrowers Nil Nil Nil -10000000 Nil Nil
current
liability paid
as tax Nil -500000 Nil Nil Nil Nil
other
overheads -9000000 -9000000 -9000000 -9000000 -9000000 -9000000
cash at the
end of the
month 82990000 82690000 83890000 74190000 77495000 99895000
Examining cash budget and advising the directors:
Some problems are identified form the cash budget prepared above. It can be seen that in May
and july the cash of the organization is supposed to be lower. Since it is making some bigger
payments. On the other hands, it was also found that due to these drastic payments these both
months are generating less cash inflows (Hatefi, 2019)
With this respect the Gaia ltd is suggested to abide with better policy to make payments. Rather
than paying at once it may go with payment in installation system. By practising this model, the
organization would be able to keep its cash flows positive.

Since both these bigger payments belong to the entire year so this allocation is not appropriate.
Here, it is recommended to the company to make a proper apportionment related planning so can
restrict such types of sudden jumps in its cash flows and can make it more stable.
Sources of funding and their advantages, disadvantages:
Sources of funding-
1) Issue of share- The organization may issue shares so can have more equity funds. This is
a good alternative if the organization is well stablished in the market
Advantages-
This is simple to proceed.
No need to pay fixed return.
Disadvantage-
It is costly than debt.
Not simple for a new or small organization.
2) Debt funds- The company may go to raise debt funds in form of loan form bank or any
other financial institution.
Advantages-
It is a cheaper source.
Simple if the organization is small.
Disadvantages-
The fixed returns are to be paid.
There may be some hard conditions.
3) Bootstrapping- With this progress of time this source is getting higher usefulness and
felicity among companies. Since with their frugal ideas or savings they may expand the
business without spending much (Husna, and Satria, 2019)
Advantages:
No scope of diluting ownership.
Easy method to collect funds.
Disadvantages-
Not as reliable as other options are.
If the funds are bigger than does not suits.

The organization is recommended that they must go with a good balance between debt and
equity. They may issue shares in the market it would be quite lucrative for them and would be
able to raise sufficient funds though the source. At the same time by arranging funds form debt
sources they will be able to reduce external interference (Kurniawati, 2022)
At the same time, the organization have experienced some market dynamics so it is also
recommended that it must also focus on bootstrapping where without being affected by external
forces can manage the funds.
Part: B
1) Ratio calculations:
Ratio Formulas 2020 2019
a. Gross profit margin Gross profit/ Net sales *100 8.559455212 8.177172061
b. Operating profit margin
Operating profit/ Net sales*100
-
0.062860136 1.300216819
c. Return on capital
employed EBIT/ Capital employed*100 4.959216966 23.12809917
d. Asset turnover Net sales/ Average assets 4.259221247 4.72002924
e. Current ratio current assets/ current liabilities 1.433347455 1.36119403
f. Acid test Current assets-inventory/current
liability 0.461625362 0.721393035
g. Inventory days Average inventory/COGS*365 60.84810953 233.5273632
h. Trade receivable days average trade debtors/Net
sales*365 1.835515977 1.348188013
i. Trade payable days average trade payable /Net
sales*365 19.99947617 22.24368902
j. Working capital
cycle/operating cycle
account receivables+ inventory
period 62.68362551 234.8755512
k. Gearing Total debt/ total equity 0.886178862 0.338983051
l. Interest cover EBIT/ Interest expenditures 2.491803279 10.21350365

2) comparison of different rations and their impacts on the organization:
It can be seen from the calculations above that the performance of the organization has been
quite drastic in these years. The comparison is being made using some key yardsticks in order to
bring deeper understanding.

Profitability-
In this case the organization made a great enhancement. In the year 2019 the GPR was 8.1%
which jumped to 8.5% in 2020. Operating profit margin got toppled so it can be said that it did
not perform as it was intended.
Efficiency-
The Asset turnover ratio shows negative direction. At the same time inventory turnover depicts
positive picture and trade receivable came up which shows the firm has been efficient in term of
its collection. On the other hands the outgoings were also managed (Mariana, 2018)
Liquidity-
Current ratio of the organization got improved in 2020 which was 1.43:1 but acid test shows that
the organization came down in this term. So altogether in term of liquidity, it has been balanced.
Gearing-
It can be seen that earlier the share of debt was lower but it got hiked which might be a strategic
move but at the same time there is one positive aspects which reflects that the interest cover of
the company is quite satisfactory.
Recommendations- There is strong need to work on profitability matter. The firm is supposed to
reduce its cost so can hike the profitability. On the other hands, over dependency on debt may
cause them severe repercussion so need to work on that. At the end, the liquidity is supposed to
be a bit more favourable.
Part: C
1) Variable budget for the Gaia ltd.
sales level(in unit) 30000 25000 35000
sales revenue(per unit) 39640 1189200000 991000000 1387400000
variable produce costs 33539.07 1006172100 838476750 1173867450
variable production overheads 2666.67 80000100 66666750 93333450
fixed production costs 80000000 80000000 80000000 80000000
fixed administration costs 7000000 7000000 7000000 7000000
Total cost 1173172200 992143500 1354200900
Profit 16027800 -1143500 33199100
2) Specific issues with Gaia ltd.-
The organization may face different issues. The very first thing it’s the organization is already
facing issues due to Covid-19 and the sales is quite fluctuating. At the same time, it can be seen

form the analysis made above that if it produces 25000 units then the organization is occurring
higher losses (Malimata, 2018)
It is very clear that it is not in position to afford negative fluctuation which may drive
comprehensive negative things to the organization. on the other hands, the selling price and
variable costs are not sharing much difference here, it may have some drastic perils.

REFERENCES
Hatefi, M. A., 2019. Indifference threshold-based attribute ratio analysis: A method for assigning
the weights to the attributes in multiple attribute decision making. Applied Soft
Computing, 74, pp.643-651.
Husna, A. and Satria, I., 2019. Effects of return on asset, debt to asset ratio, current ratio, firm
size, and dividend payout ratio on firm value. International Journal of Economics and
Financial Issues, 9(5), p.50.
Kurniawati, A., 2022. Cash Flow Analysis In The Budget As A Management Function In
Planning And Control At The BMT As-Salam Cooperative Demak. JPIM (Jurnal
Penelitian Ilmu Manajemen), 7(2), pp.292-306.
Malimata, J. V., 2018. Cash Management Practices of Integrated Resorts in Metro
Manila. Ascendens Asia Journal of Multidisciplinary Research Abstracts, 2(4).
Mariana, Z., 2018. THE CASH BUDGET –A SHORT-TERM FORECAST TOOL FOR THE
FINANCIAL STATEMENTS OF ECONOMIC ENTITIES. Ecoforum Journal, 7(2).
Welc, J., 2022. Financial statement analysis. In Evaluating Corporate Financial Performance (pp.
131-212). Palgrave Macmillan, Cham.
Yanis, M. and Furumoto, Y., 2019. Lithological identification of devastated area by Pidie Jaya
earthquake through poisson’s ratio analysis. GEOMATE Journal, 17(63), pp.210-216.