Financial Analysis and Budgetary Concerns

This assignment examines a company's financial performance based on provided budgets. The analysis focuses on the cash budget, revealing shortcomings in cash management due to lower customer collections compared to expenditures. It identifies areas of concern, such as 'other expenses,' which require cost-control measures. The assignment concludes by emphasizing the need for improved budgetary assumptions to address projected losses and maintain the company's financial stability.

ANSWER
ASIAN LIMITED
1. Sales Budget
For the Period Ending 30-09-2014
Partciulars 30-4-2014
31-5-
2014
30-6-
2014
31-07-
2014
31-08-
2014
30-09-
2014 Total
Sales with
2000 increase
every month
£
20,000
£
22,000
£
24,000
£
26,000
£
28,000
£
30,000
£
150,000
Units Sold
increasing by
40 units per
month 400 440 480 520 560 600 3000
Selling Price
Per unit
£
50
£
50
£
50
£
50
£
50
£
50
£
50
2. Cash Budget
For the Period Ending 30-09-2014
Partciulars
30-4-
2014
31-5-
2014
30-6-
2014
31-07-
2014
31-08-
2014
30-09-
2014 Total
Cash Balance,
beginning
-£
6,000
-£
20,500
-£
31,000
-£
34,500
-£
37,000
-£
38,500
-£
6,000
Add: Receipts:
Collections
from Debtors
£
20,000
£
28,000
£
20,000
£
22,000
£
24,000
£
26,000
£
140,000
Total Cash
Available
£
20,000
£
28,000
£
20,000
£
22,000
£
24,000
£
26,000
£
140,000
Deduct: Payments:
Direct Materials
£
16,000
£
20,000
£
5,000
£
6,000
£
7,000
£
8,000
£
62,000
Direct Labour
£
6,000
£
6,000
£
6,000
£
6,000
£
6,000
£
6,000
£
36,000
Production
Overheads
£
2,500
£
2,500
£
2,500
£
2,500
£
2,500
£
2,500
£
15,000
Other Expenses
£
10,000
£
10,000
£
10,000
£
10,000
£
10,000
£
10,000
£
60,000
Total £ £ £ £ £ £ £

Disbursements 34,500 38,500 23,500 24,500 25,500 26,500 173,000
Excess (Deficiency)
of Cash Available
-£
14,500
-£
10,500
-£
3,500
-£
2,500
-£
1,500
-£
500
-£
33,000
Cash Balance,
ending
-£
20,500
-£
31,000
-£
34,500
-£
37,000
-£
38,500
-£
39,000
-£
39,000
3. Debtors Budget
For the Period Ending 30-09-2014
Partciulars
30-4-
2014
31-5-
2014
30-6-
2014
31-07-
2014
31-08-
2014
30-09-
2014 Total
Opening Balance
£
48,000
£
48,000
£
42,000
£
46,000
£
50,000
£
54,000
£
48,000
Add Sales
£
20,000
£
22,000
£
24,000
£
26,000
£
28,000
£
30,000
£
150,000
£
68,000
£
70,000
£
66,000
£
72,000
£
78,000
£
84,000
£
198,000
Less Cash
Collected
-£
20,000
-£
28,000
-£
20,000
-£
22,000
-£
24,000
-£
26,000
-£
140,000
Closing Balance
£
48,000
£
42,000
£
46,000
£
50,000
£
54,000
£
58,000
£
58,000
4. Ceditors Budget
For the Period Ending 30-09-2014
Partciulars
30-4-
2014
31-5-
2014
30-6-
2014
31-07-
2014
31-08-
2014
30-09-
2014 Total
Opening Balance
£
36,000
£
25,000
£
11,000
£
13,000
£
15,000
£
17,000
£
36,000
Add Purchases
£
5,000
£
6,000
£
7,000
£
8,000
£
9,000
£
10,000
£
45,000
£
41,000
£
31,000
£
18,000
£
21,000
£
24,000
£
27,000
£
81,000
Less Cash Paid
-£
16,000
-£
20,000
-£
5,000
-£
6,000
-£
7,000
-£
8,000
-£
62,000
Closing Balance
£
25,000
£
11,000
£
13,000
£
15,000
£
17,000
£
19,000
£
19,000
5. Production Budget
For the Period Ending 30-09-2014
Partciulars
30-4-
2014
31-5-
2014
30-6-
2014
31-07-
2014
31-08-
2014
30-09-
2014 Total
Direct material £ £ £ £ £ £ £

Cost 7,500 7,500 7,500 7,500 7,500 7,500 45,000
Direct labour Cost
£
6,000
£
6,000
£
6,000
£
6,000
£
6,000
£
6,000
£
36,000
Production
Overheads
£
2,500
£
2,500
£
2,500
£
2,500
£
2,500
£
2,500
£
15,000
Total Production
Costs
£
16,000
£
16,000
£
16,000
£
16,000
£
16,000
£
16,000
£
96,000
6. Raw Materials and Finished Goods Budget
For the Period Ending 30-09-2014
Partciulars
30-4-
2014
31-5-
2014
30-6-
2014
31-07-
2014
31-08-
2014
30-09-
2014 Total
Opening Balance
of Raw Material
£
18,000
£
15,500
£
14,000
£
13,500
£
14,000
£
15,500
£
18,000
Add Purchases
£
5,000
£
6,000
£
7,000
£
8,000
£
9,000
£
10,000
£
45,000
£
23,000
£
21,500
£
21,000
£
21,500
£
23,000
£
25,500
£
63,000
Production Units 500 500 500 500 500 500 3000
Production costs
-£
7,500
-£
7,500
-£
7,500
-£
7,500
-£
7,500
-£
7,500
-£
45,000
Closing Balance
£
15,500
£
14,000
£
13,500
£
14,000
£
15,500
£
18,000
£
18,000

7. Profit and Loss Account Budget
For the Period Ending 30-09-2014
Partciulars
30-09-
2014
Sales
£
150,000
Less Cost of Sales
Direct Material
£
45,000
Direct Labour
£
36,000
Production
Overheads
£
15,000
£
96,000
Gross Profit
£
54,000
Less Expenditures
Depreciation
£
20,000
Other Expenses
£
60,000
£
80,000
Net profit / - Loss
-£
26,000
8. Balance Sheet Budget
As At 30-09-2014
Partciulars
30-09-
2014
Fixed Assets
Cost
£
200,000
Less Depreciation
-£
20,000
£
180,000
Current Assets
Debtors
£
58,000
Stock:
Raw Materials
£
18,000
Finished Goods
£
26,000
£
102,000
Less Current

Liabilities
Creditors
-£
19,000
Bank
-£
39,000
-£
58,000
Net Current
Assets
£
44,000
NetAssets
£
224,000
Financed by:
Share Capital
£
200,000
Profit and Loss -
Opening
£
50,000
Less Loss for the
year
-£
26,000
£
224,000
Total Shareholder’
s Equity
£
224,000
CONCLUSIONS FROM THE BUDGETS AS PRESENTED TO MANAGEMENT
The cash budget reveals that the company does not have the effective cash management system.
It is because during whole six months period, the company is collecting a less amount from the
customer as against the expenditure being incurred (Simpson, 2015).
The company shall look into the nature and item of the expenditures covered under the head
other expenses amounting to 10000 pound which is incurred on monthly basis as when it is
incurred. The total for the six months is 60000 pounds. The company shall define the standard so
as to reduce the level of the expenditure at the minimum.
The company has forecasted the income and expenditure of the company and other related in
such a manner that at the end of the period of 30-09-2014, the company will be incurring the loss

of 26000 pounds. Budgets are the standards against which the company shall work so as to
achieve at least the budgeted figures. As the company has in itself prescribed that the company
will be in loss, the working style of employees and the company will get mould according to that
facts. Further with the increase in budgeted losses and thereby actual losses the company will
soon face the situation where the accumulated balance of the profit and loss will be eroded and
thereby will decrease the net worth of the company which is currently now 224000 pounds
comprising of 200000 pounds from Share Capital and 24000 pounds from the accumulated
balance of the profit and loss account (Schall, 2012).
Thus, the company shall improve its budgetary assumptions.
REFERENCES
Schall, L.D., (2012), “Survey and analysis of budgeting methods”, The journal of finance, 33(1),
pp.281-287.
Simpson E, (2015), “Cash Management”, available at https://scholar.google.co.in/scholar?
hl=en&as_sdt=0%2C5&q=cash+and+sales+budget&btnG= accessed on 14/01/2018.