Cash Flow Statement Analysis

This assignment requires the calculation and analysis of a company's cash flow statement for a specific quarter. The student is given information about cash receipts, payments, and other expenses, and must determine how much finance the company needs to maintain a desired closing cash balance. The assignment also includes references and bibliography from relevant academic sources.

T-1.8.1
Details of Assessment
Term and Year 1, 2018 Time allowed 8 weeks
Assessment No 2 Assessment Weighting 40%
Assessment Type Assignment
Due Date Week No. 8 Room TBA
Details of Subject
Qualification BSBFIM501 Diploma of Leadership and Management
Subject Name Finance
Details of Unit(s) of competency
Unit Code (s) and
Names
BSBFIM501 Manage Budgets and Financial Plans
Details of Student
Student Name
College Student ID
Student Declaration: I declare that the work
submitted is my own, and has not been
copied or plagiarised from any person or
source.
Signature: ___________________________
Date: _______/________/_______________
Details of Assessor
Assessor’s Name Nadia Chowdhury
Assessment Outcome
Results Satisfactory Not
Satisfactory Marks / 40
FEEDBACK TO STUDENT
Progressive feedback to students, identifying gaps in competency and comments on positive improvements:
______________________________________________________________________________________
______________________________________________________________________________________
______________________________________________________________________________________
______________________________________________________________________________________
Student Declaration: I declare that I have been
assessed in this unit, and I have been advised of my
result. I also am aware of my appeal rights and
reassessment procedure.
Signature: ____________________________
Date: ____/_____/_____
Assessor Declaration: I declare that I have
conducted a fair, valid, reliable and flexible
assessment with this student, and I have provided
appropriate feedback
Student did not attend the feedback session.
Feedback provided on assessment.
Signature: ____________________________
Date: ____/_____/_____
Finance, Assessment No.2 Page 1
v1.1, Last updated on 02/09/2017

T-1.8.1
Purpose of the Assessment
The purpose of this assessment is to assess the
student in the following learning outcomes:
Satisfactory
(S)
Not yet Satisfactory
(NS)
Plan financial management approaches
Implement financial management approaches
Monitor and control finances
Review and evaluate financial management
processes
Assessment/evidence gathering conditions
Each assessment component is recorded as either Satisfactory (S) or Not
Satisfactory (NS). A student can only achieve competence when all assessment
components listed under Purpose of the assessment section are Satisfactory.
Your trainer will give you feedback after the completion of each assessment. A
student who is assessed as NS (Not Satisfactory) is eligible for re-assessment.
Resources required for this Assessment
 Upon completion, submit the assessment to your trainer along with assessment coversheet
 Refer to the subject notes on E-Learning prior to responding to the tasks/questions
 Any additional material will be provided by Trainer
Instructions for Students
Please read the following instructions carefully
 This assessment has to be completed In class At home
 The assessment is to be completed according to the instructions given by your assessor.
 Feedback on each task will be provided to enable you to determine how your work could be improved.
You will be provided with feedback on your work within 2 weeks of the assessment due date. All other
feedbacks will be provided by the end of the term.
 Should you not answer the questions correctly, you will be given feedback on the results and your gaps
in knowledge. You will be given another opportunity to demonstrate your knowledge and skills to be
deemed competent for this unit of competency.
 If you are not sure about any aspects of this assessment, please ask for clarification from your
assessor.
 Please refer to the College re-assessment and re-sit policy for more information.
Finance, Assessment No.2 Page 2
v1.1, Last updated on 02/09/2017

T-1.8.1
Question 1: Metropolitan Furniture
(10 mark)
Peter works in the accounts unit of the Metropolitan Furniture
Manufacturing. He was asked to prepare a proposed budget for the
forthcoming quarter. He consults with the sales manager and finds that:
Estimated sales are as follows:
February $265,000 April $290,000
March $255,000 May $250,000
June $280,000
In consultation with the production manager he estimates that the cost of
goods sold is to be budgeted at 45% of the sales figure. The salaries are
expected to be $65,000 per month. When sales exceed $260,000 in any
one month, the sales team is entitled to an additional 5% commission on
the excess sales over this figure. Other expenses are estimated to be
$35,000 per month.
The owner of the organisation is concerned about the cash flow which was
not thought of before. The owner is of the opinion that the collection of
cash from sales is slow and this could possibly lead to cash flow problems
to the organisation. As Peter has never forecasted cash flow before he
sets about collecting information on this.
Peter estimates that 80% of the total sales are going to be cash sales
where the bill is settled when the goods are purchased or delivered. 10%
of the month’s sales settle the accounts owed in the month following
sales. Others (i.e. 10% of the month’s sales) settle in the month after.
Additional information for Cash Flow Statement:
The organisation gets a month’s credit on its purchases. That is, the
accounts for the purchases (COGS) made in one month is settled in the
following month.
 All salaries are paid in the month as they are incurred.
 The additional commission is paid in the month after the month in
which it was earned.
 Other expenses are paid in the month they were incurred.
 The bank balance at the beginning of the first month is estimated to be
$40,000.
1. Show the profit and loss calculations for the April, May and June
2. Show the cash flow projection calculations for April, May and June
3. What Peter is required to advise the owner of the organisation?
4. Will the business adequate financial provision to pay tax? Why?
5. If the cash flow statement and the P & L are productive, then what are the
relevant people Peter needs to communicate if he establishes a business
plan?
Finance, Assessment No.2 Page 3
v1.1, Last updated on 02/09/2017

T-1.8.1
6. If the P & L showing good profit trend and the
forecasted cash flow statement returns positive results, then marketing
and operational departments may tend to expand their budget and
therefore the business may have cash shortage in future. How Peter can
monitor financial performance on a continuous basis?
7. Does Peter require advising the owner about any immediate change in the
financial plan? Why?
Answer (1):
Profit and Loss calculations
April May June
$ $ $
Sales 290,000.0
0
250,000.00 280,000.00
Less Cost of Goods Sold 130,500.0
0
112,500.00 126,000.00
Gross Profit 159,500.0
0
137,500.00 154,000.00
Sales Salaries 65,000.0
0
65,000.00 65,000.00
Commission 1,500.0
0
- 1,000.00
Other expenses 35,000.0
0
35,000.00 35,000.00
Total expenses 101,500.0
0
100,000.00 101,000.00
Net Profit 58,000.0
0
37,500.00 53,000.00
Answer (2):
Cash flow projections
April May June
$ $ $
Opening Cash 40,000.0
0
109,250.00 131,750.00
Plus cash in:
This month 232,000.0
0
200,000.00 224,000.00
From last month 25,500.0
0
29,000.00 25,000.00
From two months ago 26,500.0
0
25,500.00 29,000.00
Total Cash available 284,000. 254,500.00 278,000.00
Finance, Assessment No.2 Page 4
v1.1, Last updated on 02/09/2017

T-1.8.1
00
Less cash out:
Salaries 65,000.0
0
65,000.00 65,000.00
Commission - 1,500.00 -
other expenses 35,000.0
0
35,000.00 35,000.00
Stock 114,750.0
0
130,500.00 112,500.00
Total cash out 214,750.
00
232,000.00 212,500.00
Closing cash balance 109,250.
00
131,750.00 197,250.00
Answer (3):
The company shall improve the system for credit collection and must take
initiatives to collect the amount due from credit sales faster as compared
to the present scenario. It will improve the cash position of the company
which in turn will enable it to meet the expenses efficiently (Brooks 2015).
Answer (4):
The company’s net profits are less than its closing cash balances. Hence,
the company can pay the taxes on account of profit from the current cash
balances (Brigham and Ehrhardt 2013).
Answer (5):
For implementing the new business plan, management shall communicate
with the below mentioned people –
 Investors
 Shareholders, stakeholders or proprietor
 Suppliers
 Heads from other departments
Answer (6):
The company can monitor its financial performances through following
procedures on continuous basis –
 Analysis of financial statement – it is the procedure of analysing and
reviewing the financial statement of the company to take better
Finance, Assessment No.2 Page 5
v1.1, Last updated on 02/09/2017

T-1.8.1
economic decisions. The financial statement
of the company includes balance sheet, income statement, changes
in equity and cash flow statement. It helps is getting the
understanding of financial health of the entity and enables the
management to take effective decisions (Vogel 2014).
 Analysis of various ratios – ratio analysis is the quantitative analyses
of information included in the financial statements of the company.
The analysis of ratios is used for evaluating the company’s financial
and operating performances through liquidity ratios, solvency ratios,
efficiency ratios and profitability ratios.
 Analysis of market performance – it is the study regarding the
market dynamics. It is attractiveness of special market under the
specific industry. It is generally the business plan and reveals
information with regard to the market under which the business is
operated.
 Analysis of cash flow – it gives details regarding the cash outflows
and inflows over the specific period of time. It is crucial to analyse
the long term solvency and liquidity of the company (Bhandari and
Iyer 2013).
Answer (7):
Any business owner’s main motivation for investing his capital is to earn
profit through the business operation. They generally provide capital for
business expansion. Hence, if any change is taken place with regard to
the financial plan, the owner must be informed, so that he can analyse the
changes in profitability aspect (Brigham and Ehrhardt 2013). Further, if
the alteration in plan requires any additional capital, the owner will have
the option to arrange for the additional capital from his personal source or
can raise the capital from outside sources, if required.
Finance, Assessment No.2 Page 6
v1.1, Last updated on 02/09/2017

T-1.8.1
Question 2: Preparation of Cash Flow Statement
(10 mark)
Calculate the total cash inflows and cash outflows and the net cash
position at the end of December from the following information:
Use the space provided and show all line items.
XYZ Pty Ltd.
December 2012
Particulars Amount $
Cash receipts from customers 245,000
Cash paid to suppliers and employees 101,570
Interest paid 24,120
Income tax paid 25,910
Purchase of Subsidiary X, net of cash acquired 450000
Purchase of property, plant and equipment 350,100
Proceeds from sale of equipment 120,000
Interest received 22,550
Dividends received 25,654
Proceeds from issue of share capital 250,000
Proceeds from long-term borrowings 250,000
Payment of finance lease liabilities 50,000
Dividends paid 25,700
Cash and cash equivalents at beginning of period 530,750
Instruction for the students:
 Regular inflow and outflow is recorded under operating activities
 Cash inflow and outflow related to non-current assets are recorded
under investment activities
 Cash inflow and outflow related to interest bearing transactions are
recorded under financing activities.
 For each section add the inflows and then deduct the outflow.
Finance, Assessment No.2 Page 7
v1.1, Last updated on 02/09/2017

T-1.8.1
Operating activities: $ Net Cash flow
Inflows $
Cash receipts from customers
245,000.00
Total inflow
245,000.00
Outflow
Cash paid to suppliers and
employees 101,570.00
Income tax paid
25,910.00
Total outflow 127,480.00
Net inflow / (outflow) from operation 117,520.00
Investment activities:
Inflow
Proceeds from sale of equipment
120,000.00
Dividend received
25,654.00
Total inflow
145,654.00
Outflow
Purchase of subsidiary X, net of cash
acquired 450,000.00
Purchase of plant, property and
equipment 350,100.00
Total outflow 800,100.00
Net inflow / (outflow) from
investment (654,446.00)
Financing activities:
Inflow
Interest received
22,500.00
Proceeds from issue of share capital
250,000.00
Proceeds from long-term borrowing
250,000.00
Total inflow
522,500.00
Outflow
Interest paid
24,120.00
Finance, Assessment No.2 Page 8
v1.1, Last updated on 02/09/2017

T-1.8.1
Payment of finance lease liabilities
50,000.00
Dividend paid
25,700.00
Total outflow 99,820.00
Net inflow / (outflow) from finance 422,680.00
Total Cash surplus/deficit
(114,246.00)
Cash and cash equivalent at the
beginning of the year 530,750.00
Cash and cash equivalent at the
end of the year 416,504.00
Finance, Assessment No.2 Page 9
v1.1, Last updated on 02/09/2017

T-1.8.1
Question 3: GST and Cash Flow Statement
(10 mark)
A company forecasts the following transactions during the next financial year
which will affect its
Cash flow. (All ATO dues and ATO credits are expected to be settled during the
year.)
$
Cash sales, 10% GST not included
Credit sales for year, including 10% GST
Cash receipts in respect of credit sales — budget year
Cash receipts in respect of credit sales — previous year
Cash purchases, 10% GST not included
GST payable to ATO
GST input credit from ATO
Wages
Other payments, including 10% GST
90 000
186 000
150 000
11 000
80 000
10 000
20 000
110 000
44 000
Prepare a budgeted cash flow statement assuming that the opening bank
balance was $30,200.
Workings:
Cash Receipts: $ $
Cash sales 90,0
00.00
GST receipts on cash sales 9,0
00.00
Credit sales - budget year 150,0
00.00
Credit sales - previous year 11,0
00.00
Total Cash receipts 260,0
00.00
Cash Payments:
Purchases 80,0
00.00
GST payments on cash
purchases
8,0
00.00
Wages 110,0
00.00
Net GST payable to ATO 10,0
00.00
Other payments 40,0
00.00
Total Cash Payments: 248,0
00.00
Finance, Assessment No.2 Page 10
v1.1, Last updated on 02/09/2017

T-1.8.1
Cash surplus/(deficit) 12,00
0.00
Opening bank balance 30,20
0.00
Closing bank balance
42,200.00
Finance, Assessment No.2 Page 11
v1.1, Last updated on 02/09/2017