Cash Flow Statement Analysis

The assignment presents a solved cash flow statement example showcasing the movement of cash both into and out of a business over a period of time. It breaks down the statement into sections like cash inflow from operations, investing activities, and financing activities. The example illustrates how to categorize different transactions under each section, ultimately leading to the calculation of the net change in cash balance.

FINANCIAL MANAGEMENT

Table of Contents
a. Recommendation on improving business performance...........................................................4
b. Suggestion for purchasing soft drink contract.........................................................................4
c. Reasons for making adjustments in quarter 2, 3 and 4............................................................4
ASSIGNMENT 2.............................................................................................................................4
PART A...........................................................................................................................................4
1. List two sources of information in managing cost for future...................................................4
2. Three examples of external banking records...........................................................................5
3. List of personnel to communicate information........................................................................5
4. Contingency plan and three areas to include in plan...............................................................5
5. Financial plan and internal and external factors to affect financial plan.................................5
6. Budget, objectives and role of master budget..........................................................................5
7....................................................................................................................................................6
1. Flexible budget variance report...............................................................................................6
2. Opinion on entity's performance..............................................................................................6
3. Actions to improve flexible budget in variance analysis.........................................................6
8. Good cash management...........................................................................................................6
9. CVP analysis in decision making............................................................................................6
10. Calculate break even point in units and revenue...................................................................6
11. Thee types of supplies under GST.........................................................................................7
12. Labor variance.......................................................................................................................7
13. Evaluating financial information systems..............................................................................7
PART B............................................................................................................................................7
1. List 5 Types of budget.............................................................................................................7
2. List the name of budget in the table.........................................................................................8
3. Cash flow and example of cash control...................................................................................8
4. Cash flow budget.....................................................................................................................8
5. Two sources of data analysis...................................................................................................8
6. Data collection in financial management process....................................................................8
7. Financial plan...........................................................................................................................8
8. Factors affecting budget...........................................................................................................8
a. Projected sales for lunch..........................................................................................................8
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b. Projected sales for dinner.........................................................................................................8
c. Projected annual sales for the restaurant..................................................................................8
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ASSIGNMENT 1
PART B
TASK 1 Enclosed in excel
TASK 2
a. Recommendation on improving business performance
The variances will be found out by comparing the forecast budget and the next year
forecasting for first quarter. The variances of take away meal is favorable as this is 20% higher
than the actual revenue. All components of this budget is showing favorable results except sales
figure of soft drinks in which sales units has decreases from 24000 to 15000 units. The COGS
expense are also increases in relation to the expenses were in the forecast budget. The final
outcome is higher than compared with the forecast budget which reflects an entity's business
performance.
b. Suggestion for purchasing soft drink contract
The current cost price of soft drink is 0.80 per cost of the soft drink and the current units
purchased by this restaurant is 20000. The contract of purchasing soft drink of 2000 is regarded
as future opportunities for an enterprise in which 2000 is additionally purchased by an entity in
which the overall cost will get reduced to 0.50. It is recommended to purchase the current
contract as it will result into savings of 0.30 per soft drink.
c. Reasons for making adjustments in quarter 2, 3 and 4
The cost is essential aspect for an organization in which COGS are heavily imposed on
the existing business which needs to be minimized. The current focus is lies on increasing the
food revenue by 5% over all the quarters. The soft drink sales has increases from 15000 to 30000
to increase all the sales. The COGS are reduces to 5% by deducting the additional 25% cost that
induces the current expenditures of the business entity. The major changes made by an entity in
the cash inflow will further result into lower cash outflow of the business enterprise.
ASSIGNMENT 2
PART A
1. List two sources of information in managing cost for future
 Cost sheet
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 sales budget
2. Three examples of external banking records
 Bank reconciliation statement
 Credit card statement
 Deposit books
3. List of personnel to communicate information
Customers- customers executives
Competitors- Middle level employees
Business operations- Operational head
4. Contingency plan and three areas to include in plan
This plan prepare to meet future uncertainties faced by an entity such as recession.
Steps of Contingency process
 Evaluating critical events
 Prioritizing events
 work on highest rank event
Three areas in contingency plan
1. Natural disasters
2. Crisis
3. Personnel injury
5. Financial plan and internal and external factors to affect financial plan
Financial plan is evaluating existing financial to take further opportunities. It involves
income statement, balance and the cash flow statement. The inherent errors such as financial
deficiency will affect the overall financial plan and the external factor which affect the plan is
inflation and taxation rate.
6. Budget, objectives and role of master budget
It is comparison of current resources in order to procure future earnings of the business. The
objective of budget is to earn higher profit, minimize expenses. Master budget is collaboration of
small budgets prepare by an entity.
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7.
1. Flexible budget variance report
Particulars Flexible budget Actual Variance
Favourable and
unfavorable
Bikes sold 113500 113500
Revenue 90800000 90500000 300000 Unfavorable
Production cost
Variable 8512500 29492408
Fixed overhead 20200000 19400000
Support
department 32956430 37565337
Net income 29131070 4042255 25088815 Favourable
2. Opinion on entity's performance
The current performance of this business is good as it generated higher return as
compared to the actual budget as this flexible is a middle part of fixed and the actual budget
framed by an entity.
3. Actions to improve flexible budget in variance analysis
The revenue need to be improved as this is essential source of cash inflow that enhances
the overall business performance of an entity. The variable cost will be reduced as fixed cost is
rigid which is not fluctuated by an entity.
8. Good cash management
The cash can be managed by investing in bonds to generate higher returns rather than
storing in the business.
9. CVP analysis in decision making
The CVP analysis analyses the cost in enhancing sales earned by an entity to produce
higher profit. Break even point is used to predict the sales and the profit.
10. Calculate break even point in units and revenue
Sale $800
Variable cost $300
Contribution $500
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Fixed cost 5500,000
BEP(units)= Fixed cost/contribution
=5500000/500=11000 unit
BEP (revenue)= sale price*BEP units
=800*11000
=8800000
11. Thee types of supplies under GST
Types of supply
 Taxable supply
 GST free supply
 Input taxed supply
12. Labor variance
Lab our price variance= actual price-standard price
=9.50-8= $1.50 Favourable
Reasons
Efforts applied by labors to increase their efficiency
13. Evaluating financial information systems
 Checking accuracy of the information
 Technology used to automate business functioning
PART B
Production budget: It entails the number of units which business unit needs to manufacture
during the time frame.
Sales budget: Such framework renders information about the sales revenue which business unit
needs to generate over the time frame. Hence, it contains information about sales unit and
price etc.
Cash budget: This budget provides deeper insight about the cash inflow and outflow. In this,
business entity includes revenue which will be generated by the firm over expenses.
Labor budget: It is developed by firm with the motive to assess labor hours that are needed for
producing or manufacturing the predetermined output.
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Advertising budget: It entails the amount which business unit will spend on different mode such
as social media, traditional means etc.
2. List the name of budget in the table
Commonly used budget Budget type
Production budget Part of cash budget
Sales budget Element of cash budget
Advertising budget Expense
Labor budget Comes under cash budget
Cash budget Incremental
3. Cash flow and example of cash control
Cash flow provides deeper insight about the revenue that will be generated by the firm
over time frame. Besides this, it also entails the expenses that firm have to incur for performing
the business activities and functions. By developing such budget business unit can provide
guidance to personnel about the manner in which they need to spend money. In this way, by
making comparison of actual performance with standard aspect business unit can measure and
control the performance aspect of each department.
4. Cash flow budget
Mentioned in Appendix.
5. Two sources of data analysis
Qualitative
Quantitative
6. Data collection in financial management process
The financial data collected and recorded in the business will further help in analysis the existing
performance by preparing financial statement.
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7. Financial plan
Financial plan is evaluation of existing capability of an individual in terms of financial
resources to take future opportunities. It includes three financial statement such as income
statement, balance and the cash flow statement.
8. Factors affecting budget
Income of the business
Financial legislation
Expenses
9.
a. Projected sales for lunch
Sales for lunch= 160*80%*16.50*260
=549120
b. Projected sales for dinner
= Sales for dinner= 160*70%*25.50*312
=891072
c. Projected annual sales for the restaurant
Total annual sales= lunch+dinner
=549120+891072
=1440192
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APPENDIX
Cash budget
Months 1 2 3 4 5 6
Opening
cash
balance
20000 $95,920 $101,710 $108,557 $116,571 $126,069
Cash
Receipts
Cash from
Sales $10,000 $11,000 $12,100 $13,310 $14,641 $16,105
Cash from
Debtors $5,000 $1,200 $1,296 $1,400 $1,512 $1,633
Borrowing
s 70000
Total
cash
inflow $105,000 $108,120 $115,106 $123,267 $132,723 $143,807
Cash Payments
Stock
Purchases $1,500 $1,605 $1,717 $1,838 $1,966 $2,104
Advertisin
g and
Promotion $1,500 $1,200 $1,200 $1,200 1000 1000
Rent $980 $980 $980 $980 $980 $980
Wages $1,200 $1,200 $1,200 $1,200 $1,200 $1,200
Other
Expenses $500 $525 $551 $579 $608 $638
Asset
Purchases $2,500
Drawings $900 $900 $900 $900 $900 $900
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Total cash
outflow $9,080 $6,410 $6,549 $6,696 $6,654 $6,822
cash deficit
/ surplus
or closing
cash
balance $95,920 $101,710 $108,557 $116,571 $126,069 $136,985
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