Cash Flow Analysis, Budgeting, and Financial Management Techniques

This assignment presents a comprehensive analysis of cash flow management. It begins with a cash receipts budget, detailing projected cash inflows from sales, and a cash disbursements budget, outlining planned expenditures. The assignment further delves into the objectives of a cash flow statement, highlighting its role in indicating changes in a company's financial position on a cash basis and explaining the sources and uses of cash. It also differentiates between a cash budget and a cash flow statement. Additionally, the assignment includes a calculation of the payback period and Net Present Value (NPV) based on provided cash flow data, providing a practical application of financial analysis techniques. The assignment showcases financial planning, budgeting, and cash management.

Answer to Question 4 (A):
Cash Receipts Budget:
Particulars April May June
Sales on Account
$30,00
0
$40,00
0
$50,00
0
70% on next month
$21,00
0
$28,00
0
30% on second month $9,000
Cash Collection from
debtors 0 21000 37000
Cash Sales
$17,50
0
Total Cash Receipts on June
$54,50
0
Cash Disbursement Budget:
Particulars June

Inventory Purchase $22,000
S&A Expenses $14,000
Equipment Purchase $14,000
Dividend $2,500
Total Cash Payment $52,500
Answer to Part iv:
The objective of a cash flow statement is to indicate changes within financial position of
any company on cash basis. Another objective is to reveal major effects of all the business
transactions of a company in a financial year or a period on cash along with explaining the
reasons for cash flow position change between two balance sheet dates. A cash flow statement of
any company indicates several sources such as inflows along with outflows of cash over a
particular period and their effect on cash balance.
The following are the major points of differences between cash budget and cash flow
statement:
Cash budget Cash flow statement
Cash receipts and cash payments are
incorporated in the cash budget.
It denotes the cash inflows and cash outflows
of operating, investing and financing activities
of an organisation.
It is prepared for the forthcoming period. It is prepared for the current period.

Answer to Question 4 (B):
Year Cash inflow Cumulative cash flow
0 ($2,400,000) ($2,400,000)
1 700,000 ($1,700,000)
2 700,000 ($1,000,000)
3 700,000 ($300,000)
4 700,000 $400,000
5 700,000 $1,100,000
1) Net cash inflow 700,000
2) Payback period 4.43 years years
3) NPV $123,343.34