Contex Limited: Managing Financial Principles and Techniques Report

This report analyzes the financial principles and techniques applied to the case of Contex Limited, a new manufacturing business. It focuses on the creation and evaluation of a master budget, which includes detailed cash flow projections, trade payables, and trade receivables budgets. The cash budget presents monthly cash inflows and outflows, highlighting the importance of managing cash balances. The trade payables budget outlines raw material and labor costs, while the trade receivables budget forecasts sales and resulting receivables. The analysis underscores the role of budgeting in financial planning, performance evaluation, and controlling expenditures. The conclusion emphasizes the master budget's significance in financial management, enabling effective planning and control within the organization.

Managing Financial Principles and
Techniques - 2 ( Master Budgets )

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Cash Budget ................................................................................................................................2
Trade payables budget ................................................................................................................2
Trade receivables budget ............................................................................................................3
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Budget refers to the estimation of expenses and the revenues over the particular period
and are been re-evaluated on the periodic basis. It is been utilized by the government, individual
and the corporates for making the budgeted evaluation and performing the task in accordance to
it so that deviation can be eliminated. Budget is called as the financial plan for the defined period
that is one year. It helps the firm in enhancing its success and in achieving their goals effectively
and efficiently. The present study is based on Contex Limited which is been starting a new
manufacturing business. Furthermore, the report includes evaluation of various budgets that are
cash, receivable and payables estimations that are been made as per the sales units, cost of raw
material, selling and cash raised.
1

Cash Budget
April May June July
Augus
t
Septe
mber
Octob
er
Novem
ber
Decem
ber Jan Feb
Opening
cash
balance 300000 9000 -54000 -73000 -88000 -99000
-
104000 -99000 -92000 -79000 -38000
Sales 0 0 50000 60000 70000 80000 90000 90000 90000 80000 70000
Total cash
inflows 300000 9000 -4000 -13000 -18000 -19000 -14000 -9000 -2000 1000 32000
Outflows
non-
current
assets 250000
Production
overheads 20000 20000 20000 20000 20000 20000 20000 20000 20000
Non-
production
overheads 11000 11000 11000 11000 11000 11000 11000 11000 11000 11000
Material 20000 24000 28000 32000 36000 36000 36000 32000 28000
Labour 10000 12000 14000 16000 18000 18000 18000 16000 14000
Total
outflows 291000 63000 69000 75000 81000 85000 85000 83000 77000 39000 0
Cash
surplus /
closing
cash
balance 9000 -54000 -73000 -88000 -99000
-
104000 -99000 -92000 -79000 -38000 32000
Trade payables budget
April May June July August
Septem
ber October
Novemb
er
Decemb
er
500 600 700 800 900 900 900 800 700
Raw
material 40 40 40 40 40 40 40 40 40
20000 24000 28000 32000 36000 36000 36000 32000 28000
Labour 20 20 20 20 20 20 20 20 20
10000 12000 14000 16000 18000 18000 18000 16000 14000
2

Trade receivables budget
May June July August
Septemb
er October
Novembe
r
Decembe
r January
Sales (in
unit) 500 600 700 800 900 900 900 800 700
Selling
price 100 100 100 100 100 100 100 100 100
Total
receivab
les
500
00 60000 70000 80000 90000 90000 90000 80000 70000
CONCLUSION
From the above analysis it has been summarized that blend of different budget is called
as the master budget which plays a crucial role within the organization in respect of its financial
budgeting and in providing for effective planning which in turn helps in managing the financial
matters of the company. It also allows for performance evaluation at the time of planning period
and ensures for keeping adequate control on the spending of an entity.
3

4