ACC10707 - Business Analysis & Interpretation: Cash Budgeting Report

This report provides a comprehensive financial analysis, including a cash budget for January to March, a break-even analysis, and a net present value (NPV) calculation. The cash budget details expected cash inflows from accounts receivable and cash sales, as well as outflows for wages, office furniture, prepayments, administrative expenses, and payments of accounts payable. The break-even analysis determines the units needed to be sold to cover fixed costs. The NPV calculations evaluate the profitability of a project at different discount rates. The report concludes with a recommendation based on the NPV and payback period, advising the company to consider all factors before making a decision. Desklib offers similar solved assignments and resources for students.

Running Head: FINANCE 0
Finance

FINANCE 1
Table of Contents
Question 1...................................................................................................................................................2
Question 2...................................................................................................................................................4
Question 3...................................................................................................................................................6
References.................................................................................................................................................10

FINANCE 2
Question 1
Cash Budget
Cash Budget
For Jan-Mar
Jan Feb Mar
Beginning cash balance $79,550 $31,450 ($167,350)
Cash from operations 24500 28000 30100
Receipts from accounts Receivable 1 6000 10500 12000
Total Available Cash $104,050 $59,450 ($137,250)
Less:
Wages $35,000 $35,000 $35,000
office furniture 5000 7000 0
Pre Payments 0 0 4250
Administrative 15000 16000 15000
Payments of Accounts Payable 2 17600 18800 19600
Loan $0 $150,000 $0
Total Expenses $72,600 $226,800 $73,850
Ending Cash Balance $31,450 ($167,350) ($211,100)
Receipts from accounts Receivable

FINANCE 3
Statement of Receipts from accounts
receivable
2018 2019
Dec Jan Feb March
Credit sales 100000 120000
14000
0
16000
0
Cash Sales 20000 35000 40000 43000
Payment schedule:
Credit sales
70 % in the month of purchase 84000 98000
11200
0
30 % in current year 30000 36000 42000
114000
13400
0
15400
0
Cash Sales
70 % in the month of purchase 24500 28000 30100
30 % in current year 6000 10500 12000
30500 38500 42100
144500
17250
0
19610
0
Statement of Receipts from Accounts Payable
2018 2019

FINANCE 4
Dec Jan Feb March
Accounts Payable 44000 47000 49000 52000
Payment schedule:
60 % in the month of purchase 28200 29400 31200
40 % in current year 17600 18800 19600
45800 48200 50800
Question 2
A) The available production capacity is 38250 units.
Present production
No of compasses 45,000.00
Operating
Percentage 85%
Production Capacity 38,250.00
B)
Sales per unit $ 25.00
Variable Cost per
unit $ 10.00

FINANCE 5
Contribution per
unit $ 15.00
Fixed Costs
$425,000.0
0
Break even units 28333
The contribution per unit for the company is $15.
C)
The project shall be accepted since the breakeven units are less than the capacity of the
production of the company at 38250 units hence, this will not hamper the project can be accepted
easily (Nagarajan & Visagamoorthi, 2018).
D)
The opportunity cost for the company is outlined below
Opportunity
cost
Variable
$100,000.0
0
Fixed Costs
$425,000.0
0
$525,000.0

FINANCE 6
0
E)
The special order will earn additional $3 which will be the additional profit.
Additional profit =$10000*3
$30000
Question 3
A)
Net Present Value
Years
Cash
Flows
Rate @
4%
Present
Value
0 -134500 1.000 -134500
1 66000 0.800 52800
2 66000 0.925 61021
3 57000 0.889 50673
4 39900 0.855 34107
5 27400 0.822 22521
86621

FINANCE 7

FINANCE 8
B)
Net Present Value
Years
Cash
Flows
Rate @
7%
Present
Value
0 -134500 1.000 -134500
1 66000 0.935 61682
2 66000 0.873 57647
3 57000 0.816 46529
4 39900 0.763 30440
5 27400 0.713 19536
81334
C)
Net Present Value
Years
Cash
Flows
Rate @
9%
Present
Value
0 -134500 1.000 -134500
1 66000 0.917 60550
2 66000 0.842 55551
3 57000 0.772 44014
4 39900 0.708 28266
5 27400 0.650 17808

FINANCE 9
71690
D)
Net present value is the value that is calculated by deducting the preset value of the cash
outflow from present value of the inflows of the cash. NPV is basically used in making capital
budgeting decisions. The net present value is calculated basically to analyze the profitability of
the project and gives the idea of whether the company shall choose the option or not. The PV
factor plays an important role in the calculation of the NPV as the rate of return will discount the
factors and ultimately decide the plan that best fits the needs of the purchaser. Though according
to this rate all the projects can be acceptable as they have the positive NPV however the total
decision does not reside only on the basis of the NPV and the other factors must also be
considered, which are payback period and internal rate of return. Therefore it is advised to the
company that all the factors must be considered however, project A is feasible (Balyeat & Cagle,
2015).

FINANCE 10
E)
If the required payback period is two years it is advised to the company that the
discounting factor shall be less than 4% as the payback period at the return of the 4% is 2.04
years. The company will be able to pay back the amount after the period of the two years hence
the project will be acceptable only if the return does not exceed the 4% (Banerjee, 2015).

FINANCE 11
References
Balyeat, B., & Cagle, J. (2015) MIRR: The Means to an End? Reinforcing Optimal Investment
Decisions Using the NPV Rule. Journal of Financial Education, 90-102.
Banerjee, S. (2015) Contravention Between NPV & IRR Due to Timing of Cash Flows: A Case
of Capital Budgeting Decision of an Oil Refinery Company. American Journal of
Theoretical and Applied Business, 1(2), 48-52.
Nagarajan, K., & Visagamoorthi, D. (2018) Use of Break-even analysis in financial appraisal of
projects. Indian Journal of Public Health Research & Development, 9(11), 2098-2105.