Strategic Financial Management Project Report and Analysis

This report provides a comprehensive analysis of strategic financial management, focusing on investment decisions for Investhical. It begins with a memo detailing a ratio analysis of five different stocks—Sonic Healthcare, Woolworths, BHP Billiton, Boral Limited, and National Takaful—across profitability, asset efficiency, liquidity, market position, and capital structure. The analysis recommends investing in Sonic Healthcare, BHP Billiton, and National Takaful. The report further explores funding sources, differentiating between short-term options like bank overdrafts, customer advances, and commercial paper, and long-term options such as bank loans and borrowings, ultimately suggesting that Investhical utilize long-term loans and borrowings due to their lower cost of capital.

Running Head: Strategic Financial Management
1
Project Report: Strategic Financial Management

Strategic Financial Management 2
Contents
Task 1: Memo...................................................................................................................3
Task 2................................................................................................................................7
Introduction...................................................................................................................7
Source of funding.........................................................................................................7
Recommendation and conclusion...............................................................................11
Task 3..............................................................................................................................14
References.......................................................................................................................26
Appendix.........................................................................................................................28

Strategic Financial Management 3
Task 1: Memo
To,
Investhical CEO
48, New South Wales,
Australia.
Dear Sir,
Hope you are doing well!
It is always important for a business to measure and evaluate the stock performance and
position of financial activities of an organization before making an investment into the
company. As Investhical is looking for 3 stocks from different sector to make an investment,
5 different stocks from 5 different sectors have been collected and compared to reach over
best 3 best stocks. Sonic healthcare, Woolworths, BHP Billiton, Boral limited and National
Takaful’s stock have been considered to evaluate the investment and return positions of the
stock. In order to make an investment decision, ratio analysis study has been conducted over
all the 5 stocks and different key financial position such as profitability, asset efficiency,
liquidity, market position and capital structure has been calculated to reach over conclusion
about investment.
The profitability ratio analysis study explains that performance of Sonic health care, BHP
Billiton and National Takaful is better than Woolworths and Boral limited.
Ratio Calculations Sonic
Healthcar
e
Woolwort
hs
BHP Billiton Boral
Limited
National
Takaful
Profitability Ratios: 2018 2018 2018 2018 2018
Return on Capital
employed
Operating profit / 660,251 -9,291,000 14,751,000 210 92,706
Capital employed
(total assets - current
liabilities)
4,776,41
2
14,362,00
0
98,004,000 8,515 262,112
Answer: % 13.82% -64.69% 15.05% 2.47% 35.37%

Strategic Financial Management 4
Return on assets
Net profit / 475,606 1,724,000 3,705,000 441 12,343
Total assets 8,200,93
4
23,558,00
0
111,993,000 9,510 399,815
Answer: 5.8% 7.3% 3.3% 4.6% 3.1%
Net profit margin %
Net profit / 475,606 1,724,000 3,705,000 441 12,343
Sales Revenue % 5,476,175 56,726,000 43,638,000 5,731 201,564
Answer: 8.7% 3.0% 8.5% 7.7% 6.1%
(Annual report, 2018)
Further, the asset efficiency ratio study explains that performance of Sonic health
care, Boral Limited and National Takaful is better than Woolworths and BHP Billiton.
Ratio Calculations Sonic
Healthcare
Woolworths BHP
Billiton
Boral
Limited
National
Takaful
Asset Efficiency Ratios 2018 2018 2018 2018 2018
Creditors turnover
days
Accounts payable/ 207,024 5,316,000 5,977,000 752 137,703
Cost of sales 918,211 40,256,000 10,916,000 3,829 108,858
Answer: (note the
above needs to be x
365)
#
days
0.23 0.13 0.55 0.20 1.26
Debtors Turnover
(days)
Average trade debtors / 716,101 420,000 3,096,000 876 240,320
Sales revenue (note
used operating revenue)
#
days
5,476,175 56,726,000 43,638,00
0
5,73
1
201,56
4
Answer: (note the
above needs to be x 365)
0.13 0.01 0.07 0.15 1.19
(Annual report, 2018)
More to it, study has been done on liquidity position of the stocks and found that performance
of Sonic health care, Boral Limited and National Takaful is better than Woolworths and BHP
Billiton.
Ratio Calculations Sonic
Healthcare
Woolworths BHP
Billiton
Boral
Limited
National
Takaful
Liquidity Ratios 2018 2018 2018 2018 2018

Strategic Financial Management 5
Current Ratio
Current Assets / 1,231,709 7,181,000 35,130,000 1,738 159,495
Current liabilities 867,863 9,196,000 13,989,00
0
99
5
138,22
7
Answer: 1.42 0.78 2.51 1.75 1.15
Quick ratio
Current Assets -
Inventory /
1,124,929 2,948,000 31,366,000 1,124 159,495
Current Liabilities 867,863 9,196,000 13,989,00
0
99
5
138,22
7
Answer: 1.30 0.32 2.24 1.13 1.15
(Annual report, 2018)
Capital structure study has been conducted further in order to measure the management of
solvency level. Study defines that Sonic health care, Boral Limited and BHP Billiton is better
than Woolworths and National Takaful.
Ratio Calculations Sonic
Healthcare
Woolworths BHP
Billiton
Boral
Limited
National
Takaful
Capital Structure Ratios 2018 2018 2018 2018 2018
Debt equity ratio
Total liabilities / 4,023,527 13,077,000 56,401,000 3,780 303,950
Total equity 4,177,407 10,481,000 55,592,000 5,731 95,865
Answer: % 0.96 1.25 1.01 0.66 3.17
Debt ratio
Total debt / 4,023,527 13,077,000 56,401,000 3,780 303,950
Total assets 8,200,934 23,558,000 111,993,000 9,510 399,815
Answer: % 0.49 0.56 0.50 0.40 0.76
Interest Coverage Ratio
EBIT / 660,251 -9,291,000 14,751,000 210 92,706
Net Finance Costs (used
net interest expense)
78,444 154,000 1,029,000 106 12,481
Answer: times
p.a
8.42 -60.33 14.34 1.98 7.43
(Annual report, 2018)
Lastly, market value ratios define that earnings per share of Sonic health care, Woolworths
and BHP Billiton is better in the market.

Strategic Financial Management 6
Ratio Calculations Sonic
Healthcare
Woolworths BHP
Billiton
Boral
Limited
National
Takaful
Market value
Ratios
2018 2018 2018 2018 2018
Earnings per share
Net income 475,606 1,724,000 3,705,000 441 12,343
Weighted average
shares outstanding
422,212 1,300,500 2,661,500 1,172 150,000
Answer: 1.13 1.33 1.39 0.38 0.08
(Annual report, 2018)
Hence, the study recommends Investhical to invest in Sonic Healthcare, BHP Billiton and
National Takaful to reduce the financial risk and maintain the return level for a long time.

Strategic Financial Management 7
Task 2:
Introduction:
Funds management is one of the crucial works of financial manager of an
organization. It is important for the manager to set the solvency position and reduce the risk
through raising the fund in such a way that all the short term and long term funds could be
paid off easily with the help of available resources in the market. In order to raise the funds
for short term and long term, bank loan, creditors, overdrafts, equity, debentures etc are the
main source (Zimmerman and Yahya-Zadeh, 2011). The report focuses on 3 companies Sonic
Healthcare, BHP Billiton and National Takaful to make an investment. In order to make
investment in these companies, Investhical would require £ 3,000,000 which would be raised
through taking the help of short term and long term capital sources. The main focus of the
report is on various funds which could be raised for short term and long term to meet the
demand of the company and maintain the solvency, liquidity and profitability position of the
company.
Source of funding:
Funding is a process in which financial resources are provided to the company in form
of money or other financial resources in order to finance the need, proposal, project or any
program in an organization. Mainly the source of funding is divided into 2 categories i.e.
short term funds and long term funds. Those funds which are generated by the company for
short term projects such as working capital, operation etc is called short term funds. Further,
those funds which are generated by the company for long term projects such as new
investment, property, plant and equipment, new project etc is called long term funds (Weil,
Schipper and Francis, 2013). Short term funds are generated by the company for the projects
or operations which would take place in less than 1 year whereas all those funds which are
generated for more than 1 year is called long term funds.
Short term funds:
Basically, a firm is required to raise the funds through short term sources to manage
the daily activities of the company and maintain the working capital level. Short term
obligations are met by the company through generating the short term funds. Overall short
term activities such as management of liquidity level, production cycle, enough funds etc are
managed through short term funds only (Horngren, 2009). In the report, few methods of short

Strategic Financial Management 8
term have been studied which could be used by Investhical to manage the performance and
production cycle of the company:
Bank overdraft:
It is one of the common sources of short term funds. Company could raise the funds
till an overdraft limit from the bank for short term to manage the operations and needs of the
company. Bank overdraft is quite easier way to generate the funds. However, overdraft
interest rate is higher and user is obligated to pay the funds in shorter time (Deegan, 2013). In
terms of Invethical case, this is not a good idea as company wants to generate the fund for
longer period.
Advance from customers:
It is mostly used source of short term funds. Company could raise the funds through
taking the online payment from the customers of the company (Edwards, 2013). Advanced
from customers is quite easier way to generate the funds as well as company is not required
to do any documentation. However, there is a risk of goodwill as well as liquidity position of
the company. In terms of Investhical case, this is not a good idea as company wants to
generate the fund for longer period.
Overdraft agreement:
Overdraft agreement is a source of short term funds. Company could raise the funds
through selling some overdraft agreement in the market. It is not required for the company to
be checked and evaluated for overdraft agreement. However, there is a risk of cash flow
fluctuations and outflow limit (DRURY, 2013). In terms of Investhical case, this is not a
good idea as company wants to generate the fund for longer period.
Treasury bills:
T-Bills are a source of short term funds. Company could raise the funds through
selling some T bills in the market. It is quite simple to sell and generate the funds. However,
there is a risk of cash flow fluctuations and liquidity position of the company. In terms of
Investhical case, this is not a good idea as company wants to generate the fund for longer
period.
Commercial paper:
Commercial paper is a source of short term funds. Company could raise the funds
through selling some commercial paper in the market. It is quite simple to sell and generate

Strategic Financial Management 9
the funds. However, there is a risk of cash flow fluctuations and liquidity position of the
company. In terms of Investhical case, this is not a good idea as company wants to generate
the fund for longer period.
Long term funds:
Basically, a firm is required to raise the funds through long term sources to manage
the long term activities of the company and maintain the funds for long term projects. Long
term obligations are met by the company through generating the long term funds. Overall
long term activities such as investment into fixed assets, new projects etc are managed
through long term funds only (Deegna, 2012). In the report, few methods of long term have
been studied which could be used by Investhical to manage the funds for long term:
Long term loan:
It is one of the common sources of long term funds. Company could raise the funds
through raking long term loans from bank for long time to manage the various new long term
projects and long term sustainability of the business. Loan from bank is quite easier way to
generate the funds as only credit history and financial statement of the company are checked.
However, it is important for the company to repay the loans in the given time along with the
higher interest. In terms of Invethical case, this is a good idea as currently the cost of capital
of the bank loan of the company is 0.07%. It explains that the funds would be managed by
the company in lower cost.
Cost of bank loan:
Net finance cost 55.00
Less: Tax @35% 19.25
After tax cost of debt 35.75
Bank loan amount 1,585.00
After tax cost of bank loan
(%) 2.26%
(Deegan, 2012)
Borrowings:
It is one of the common sources of long term funds. Company could raise the funds
through taking borrowings from the market or any financial institution on the basis of credit
rating and fund payment system of the company. Borrowings are quite easier way to generate

Strategic Financial Management 10
the funds as only credit history and financial statement of the company are checked.
However, it is important for the company to repay the loans in the given time along with the
higher interest. In terms of Invethical case, this is a good idea as currently the cost of capital
of the borrowings of the company is 0.07% (Ward, 2012). It explains that the funds would be
managed by the company in lower cost.
Cost of borrowings:
Net finance cost 85.00
Less: Tax @35% 29.75
After tax cost of debt 55.25
Borrowings amount 2,125.00
After tax cost of borrowings
(%) 2.60%
Debts:
Debt is the most used and common source of long term funds. Company could raise
the funds through issuing the debentures in the market. Debentures are quite easier way to
generate the funds as only available resources and overall financial and credit position of the
company is checked by the agencies and capital market. However, it is important for the
company to repay the debt payment in the given time along with the higher interest. In terms
of Invethical case, this is a good idea as currently the cost of capital of the borrowings of the
company is 0.07% (Lord, 2007). It explains that the funds would be managed by the
company in lower cost.
Cost of debt:
Net finance cost 167.00
Less: Tax @35% 58.45
After tax cost of debt 108.55
Borrowings amount 165,723.00
After tax cost of debt (%) 0.07%
Equity and Retained earnings:

Strategic Financial Management 11
Lastly, owner’s equity, retained earnings and equity funds are the long term funds
which are managed by every organization. Company could raise the funds through issuing the
shares in the market, retain some amount from net profit generated and owners could invest
the fund for long term betterment of the company. Equity is quite easier way to generate the
funds as no tough documentation is required (Schwartz, 2017). However, it impacts over the
solvency and capital structure level of the company. In terms of Invethical case, this is a good
idea as currently the cost of equity of the company is 3.33%. It explains that the funds would
be managed by the company in lower cost.
Cost of Equity: CAPM model
A. Risk free rate 2.75%
B. Market rate of return 8%
C. Beta 0.11
D. CAPM 3.33%
Recommendation and conclusion:
The overall study over Investhical explains that Investhical requires £ 3,000,000 to
make an investment in Sonic Healthcare, BHP Billiton and National Takaful. Currently,
company owns £ 2,000,000 and additional funds of £ 1,000,000 is required to make the
investment. Various available resources in the market for the company has been studied and
on the basis of study, it has been concluded that short tern funds are not feasible for this case
as it would raise the funds for short tern only and company requires fund for long term
project. Further, it has been identified that cost of debt, cost of borrowings, cost of bank loan
and cost of equity of the company is 0.07%, 2.60%, 2.26% and 3.33%.
Through the investigation, it has been concluded that it is best for the company to
raise £ 6,00,000 through equity and £ 4,00,000 through debt to manage the solvency level,
capital risk and other financial risk of the company. Through study, it has been recognized
that below are the market share, cost of debt, cost of equity and total cost of capital of the
company:
Book Value Weights
Debt Equity Total
Equity shares
£
600,000
Value of debt (short term £

Strategic Financial Management 12
borrowings+ long term
borrowings) 400,000
Total
£
400,000
£
600,000
£
1,000,000
D. Weights 40.00% 60.00%
Cost of Equity: CAPM model
A. Risk free rate 2.75%
B. Market rate of return 8%
C. Beta 0.11
D. CAPM 3.33%
Cost of debt:
Net finance cost 167.00
Less: Tax @35% 58.45
After tax cost of debt 108.55
Borrowings amount 165,723.00
After tax cost of debt (%) 0.07%
Debt
Ordinary
Shares Total
Cost of
Finance 0.07% 3.33%
Market
Weights 0.40 0.60
WACC 0.03% 2.00% 2.02%
WACC of company is 2.02%. It explains that if the company invest into equity and
debt in the ratio of 60:40 then the total cost of the company would be 2.02% and more than
2.02% could be earn by the company easily through investing in the Sonic Healthcare, BHP
Billiton and National Takaful. The return from all the three companies is as follows:
Sonic Healthcare
Cost of Equity: CAPM model
A. Risk free rate 2.75%

Strategic Financial Management 13
B. Market rate of return 8%
C. Beta 0.78
D. CAPM 6.85%
BHP Billiton
Cost of Equity: CAPM model
A. Risk free rate 2.75%
B. Market rate of return 8%
C. Beta 0.56
D. CAPM 5.69%
National Takaful
Cost of Equity: CAPM model
A. Risk free rate 2.75%
B. Market rate of return 8%
C. Beta -0.09
D. CAPM 2.28%
Hence, it concludes that current investment of 60:40 in equity and debt is better
option for the company. It must be done by the company to manage and improve the overall
performance in the market.

Strategic Financial Management 14
Task 3:
Nyota minerals limited are a British company which is a gold exploration and
development company. Company is listed in Australian stock exchange as well as London
stock exchange. Company is mainly based in Australian market and owns around 70% stock
in Ivrea project. The report focuses on the various expenses of the company as well as
budgetary evaluation in order to manage the current performance and forecast the future
position of the company. Restated financial reports of the company has been studied to
manipulation in the accounting policies and found that error in the company. Various cost
tools and budgetary reports have been studied ad prepared for Nyota minerals to improve the
overall performance of the company.
The process of cost accounting assist an organization to identify the cost associated
with the production level and operating activities of the organization in order to determine
that what the additional and irrelevant cost in the business is. This identification helps the
business to eliminate the same so that the profitability level of the business could be
improved and the common goal of the business could be met (Higgins, 2012). It helps the
company to maintain all the operating cost, factory cost and total production cost in an
efficient manner. Cost accounting’s main process includes recording, analyzing, evaluation
and allocation of various costs on the basis of a common base or the type of cost.
In case of Nyota minerals limited, cost accounting process has been applied to reach
over conclusion about performance of the company. Annual report (2014) of Nyota Minerals
explains that various expenses of the company have been restated in 2014 of 2013. These
amounts have been restated because of wrong allocation of cost and no proper use of
accounting policies. Below is the report of restated statement of the company:

Strategic Financial Management 15
(Annual report, 2014)
Annual report (2014) explains about huge changes into the expenses of the company
after restatement. It explains that after such changes, the overall performance of the company
has lead towards improvement. Along with that, company has been successful to maintain a
significant amount as profit. Overall total restated profit of the company is $ -25,344,879
which explains about decrement in the loss level of the company.
The financial statement of year 2014 explains that significant changes have been done
by the company in its annual report to improve the overall performance and position level.
Currently, the production cost and other operating expenses of the company have been
reduced at great level which directly has impacted over the profitability level. Hence, it has

Strategic Financial Management 16
been found that it is important for the business to follow proper accounting policies so that
better outcome could be received (Kaplan and Atkinson, 2015).
The main aim of cost accounting process is to gather, evaluate, analyze and offer
proper information about various cost involved into the production process and elsewhere in
the organization to the managers of the organizations. This will help the managers to measure
the cost level and profitability position of the business so that a better conclusion could be
reached and better policies could be prepared for the betterment of the business in near future
(Garrison, Noreen, Brewer and McGowan, 2010). There is huge number of statistical
methods which could be applied by the managers in an organization to evaluate that how
much unnecessary cost is associated with the business and how could it be overcome to
improve the performance of the company.
The main aim of this overall performance is to meet the common goal of the
organization and offer better statistical data to the stakeholders of the company in a
presentable manner. Cost accounting makes it easier for the business to manage all the
operations in efficient manner (Gitman and Zutter, 2012). However, it is not mandatory for
the business to showcase the cost accounting data to the stakeholders of the business as these
are the internal reports which are prepared to make better decision for overall performance of
organization. The different cost involved in the business is studied to reduce it in order to
improve the profitability level and market performance of organization.
In case of Nyota Minerals limited, it has been studied that the overall performance of
the company has been improved at great extent in the year of 2014 against the previous year
financial performance. Study explains that these changes have occurred because of better
policies and scrutiny of unnecessary cost involved in the business. It concludes that these
changes and cost accounting tools have helped the business at great extent to improve the
overall level of the company.
More to it, it has been studied that costing design is called to a set of methods which
has been prepared and applied over the organization in order to manage the various cost level
and factors of the company which are used to make a decision about the cost system of the
company (Deegan, 2012). These cost design tools assist the business to evaluate all the
irrelevant cost in the business and offer a format to manage all the cost in a presentable
manner in order to make better decision about the performance level of the company. The

Strategic Financial Management 17
cost design and cost system approach assist the administration of business to gather, identify
and record all the cost expenses in better way in order to take decision in lesser time.
These reports are basically prepared for the internal stakeholders of the business so
that a blue print could be prepared about the future work in order to meet the common goal
and strategically position in the business. Cost design system is mainly divined into 2 parts;
one is internal cost design system and other one of external cost design system.
Internal data of Nyota minerals limited has been considered while preparing the
internal cost design system. The main aim behind applying this process into the organization
is to evaluate the profitability level, financial performance level and position of the company
at internal level. This process always makes t easier for the organization and its management
to evaluate the required changes so that better strategies could be prepared accordingly (Lord,
2007). On the basis of internal cost design tools, performance of the company has been
measured at internal level so that proper policies implementation could be done accordingly
in Nyota minerals limited. This system only takes consideration over the internal
performance and measure whether the company is able to meet all the internal performance
level. The internal cost design system makes it easier for Nyota minerals limited and its
management to make better decision, decision, strategy, plan, policy etc in order to improve
the overall performance level of the company. Along with that, this tool also assists the
business to make decision about the government and other stakeholders of the business.
Further, external factors and data of Nyota minerals limited has been considered while
preparing the external cost design system. The main aim behind applying this process into the
organization is to evaluate the profitability level, market position and overall market shares of
the company at external level. This process always makes it easier for the organization and its
management to evaluate the required changes so that better strategies could be prepared
accordingly (Deegan, 2012). On the basis of external cost design tools, performance of the
company has been measured at external level so that proper policies implementation could be
done accordingly in Nyota minerals limited. This system only takes consideration over the
external aspects and performance and measure whether the company is able to meet all the
external performance level. The internal cost design system makes it easier for Nyota
minerals limited and its management to make better decision, decision, strategy, plan, policy
etc in order to improve the overall performance level of the company. Along with that, this
tool also assists the business to make decision about the government and other stakeholders
of the business.

Strategic Financial Management 18
Through conducting the system over cost design and cost system over Nyota minerals
limited, it has been found that few changes must be done by the company in its internal
policies so that the level of irrelevant and additional cost could be reduced and ultimately, it
help the business to improve overall profitability position of the business. Annual report
(2014) explains that there is huge gap in the company to maintain the cost level. If proper
evaluation done over each of the associated cost of the business then it would directly
overcome the cost level of the business and along with that, the production process of the
business would be improved. Nyota is also recommended to forecast the future performance
through considering the current market position and historical data of the company in order to
measure how much units must be produced and in order to do so, how many labour hours and
raw material is used or so on. So that, the additional cost of the business could be controlled.
These changes must be done by the company in internal level and it will automatically
improve the external level of the business. It is the most important part of an organization to
measure the relevant and irrelevant cost and make better decision accordingly.
Nyota minerals limited must forecast the future performance through considering the
current market position and historical data of the company in order to make proper budgetary
reports. These budgetary reports assist the business to measure how much units must be
produced and in order to do so, how many labour hours and raw materials are used or so on.
In current situation, below are the master budget reports of the company:
Monthly sales revenue budget
Sales Units Jan-
18
Feb-
18
Mar
-18
Apr-
18
Ma
y-
18
Jun-
18
Jul-
18
Aug
-18
Sep-
18
Oct-
18
Nov-
18
Dec-
18
Copper 1,50
0
1,20
0
1,30
0
1,00
0
400 500 400 200 1,30
0
1,20
0
1,20
0
1,50
0
Selling price
Copper $10
0.00
$10
0.00
$10
0.00
$10
0.00
$10
0.0
0
$10
0.00
$10
0.0
0
$10
0.0
0
$10
0.00
$10
0.00
$10
0.00
$10
0.00
Sales
Revenue
Copper $
1,50
,000
$
1,20
,000
$
1,30
,000
$
1,00
,000
$40
,00
0
$50,
000
$40
,00
0
$20
,00
0
$
1,30
,000
$
1,20
,000
$
1,20
,000
$
1,50
,000

Strategic Financial Management 19
Total Sales
Revenue
$
1,50
,000
$
1,20
,000
$
1,30
,000
$
1,00
,000
400
00
500
00
400
00
200
00
$
1,30
,000
$
1,20
,000
$
1,20
,000
$
1,50
,000
Cash collection budget
Jan-
18
Feb-
18
Mar
-18
Apr-
18
Ma
y-
18
Jun-
18
Jul-
18
Aug
-18
Sep-
18
Oct-
18
Nov-
18
Dec-
18
Total Sales
Revenue
$
1,50
,000
$
1,20
,000
$
1,30
,000
$
1,00
,000
400
00
500
00
400
00
200
00
$
1,30
,000
$
1,20
,000
$
1,20
,000
$
1,50
,000
Total cash
sales
500
00
455
4
478
2
378
2
185
0
213
8
163
8
108
8
478
2
455
4
455
4
542
0
Credit sales
(1st month
amount)
100
000
136
62
143
46
113
46
555
0
641
4
491
4
326
4
143
46
136
62
136
62
162
60
Credit sales
(2nd month
amount)
108
40
910
8
956
4
756
4
370
0
427
6
327
6
217
6
956
4
910
8
910
8
Total Cash
collection
150
000
290
56
282
36
246
92
149
64
122
52
108
28
762
8
213
04
277
80
273
24
307
88
Production budget in units
Budgeted
sales
Jan-
18
Feb-
18
Mar
-18
Apr-
18
Ma
y-
18
Jun-
18
Jul-
18
Aug
-18
Sep-
18
Oct-
18
Nov-
18
Dec-
18
Copper 1,50
0
1,20
0
1,30
0
1,00
0
400 500 400 200 1,30
0
1,20
0
1,20
0
1,50
0
Add: desired
ending
inventory
Copper 750 600 650 500 200 250 200 100 650 600 600 750
Total needs
Copper 2,25
0
1,80
0
1,95
0
1,50
0
600 750 600 300 1,95
0
1,80
0
1,80
0
2,25
0
Less:
Beginning
Inventory
Copper 750 600 650 500 200 250 200 100 650 600 600

Strategic Financial Management 20
Required
production
Copper 3,00
0
1,65
0
2,00
0
1,35
0
300 800 550 200 2,50
0
1,75
0
1,80
0
2,40
0
Total
Required
production
3,00
0
1,65
0
2,00
0
1,35
0
300 800 550 200 2,50
0
1,75
0
1,80
0
2,40
0
Direct Material and cash purchase budget
Jan-
18
Feb-
18
Mar
-18
Apr-
18
Ma
y-
18
Jun-
18
Jul-
18
Aug
-18
Sep-
18
Oct-
18
Nov-
18
Dec-
18
Budgeted
production
units
Copper 225 105 135 85 10 55 35 10 185 115 120 165
Material
units needed
for
production
Copper 225 105 135 85 10 55 35 10 185 115 120 165
Add: desired
inventory
level
Copper 113 53 68 43 5 28 18 5 93 58 60 83
Total
material
units
required
Copper 338 158 203 128 15 83 53 15 278 173 180 248
Less:
Beginning
inventory
Copper 0 113 53 68 43 5 28 18 5 93 58 60
Material
units to be
purchased
Copper 338 45 150 60 -28 78 25 -3 273 80 123 188
Raw material
1

Strategic Financial Management 21
Copper 632
8
844 281
3
112
5
-
516
145
3
469 -47 510
9
150
0
229
7
351
6
Raw material
2
Copper 455
6
608 202
5
810 -
371
104
6
338 -34 367
9
108
0
165
4
253
1
Total cost of
direct
material
241
5
427
8
102
64
482
2
-
310
576
3
185
4
126
5
180
7
524
0
214
7
283
5
Cash
Purchase
724
8
128
3
307
9
144
7
-93 172
9
556 379 558
2
205
0
274
4
385
1
0 169
12
299
4
718
5
337
6
-217 403
4
129
8
885 130
25
478
3
640
3
724
8
181
95
607
4
863
2
328
3
151
2
459
0
167
7
646
7
150
75
752
7
102
53
Direct Labour budget
Jan-
18
Feb-
18
Mar
-18
Apr-
18
Ma
y-
18
Jun-
18
Jul-
18
Aug
-18
Sep-
18
Oct-
18
Nov-
18
Dec-
18
Budgeted
production
units
Copper 337
5
157
5
202
5
127
5
150 825 525 150 277
5
172
5
180
0
247
5
Total Direct
Labour hour
needed
Copper (1
hour)
337
5
157
5
202
5
127
5
150 825 525 150 277
5
172
5
180
0
247
5
Direct labour
cost per hour
Copper 945
00
441
00
567
00
357
00
420
0
231
00
147
00
420
0
777
00
483
00
504
00
693
00
Total Labour
cost
945
00
441
00
567
00
357
00
420
0
231
00
147
00
420
0
777
00
483
00
504
00
693
00
Manufacturing Overhead Budget

Strategic Financial Management 22
Jan-
18
Feb-
18
Mar
-18
Apr-
18
Ma
y-
18
Jun-
18
Jul-
18
Aug
-18
Sep-
18
Oct-
18
Nov-
18
Dec-
18
Units to be
produced
Copper 337
5
157
5
202
5
127
5
150 825 525 150 277
5
172
5
180
0
247
5
Variable
Overhead
cost
Indirect
Material
120
60
611
8.5
728
5.5
489
6
131
4
341
5.5
207
0
120
7.5
985
5
658
3.5
675
9
868
0.5
Indirect
Labour
603
0
305
9.25
364
2.75
244
8
657 170
7.75
103
5
603
.75
492
7.5
329
1.75
337
9.5
434
0.25
Total
Variable
Overhead
cost
180
90
917
7.75
109
28.2
5
734
4
197
1
512
3.25
310
5
181
1.2
5
147
82.5
987
5.25
101
38.5
130
20.7
5
Fixed
Overhead
cost
Indirect
Material
148
50
756
0
879
0
585
0
174
0
405
0
249
0
159
0
119
40
819
0
834
0
106
80
Indirect
Labour
742
5
378
0
439
5
292
5
870 202
5
124
5
795 597
0
409
5
417
0
534
0
Utilities 550 550 550 550 550 550 550 550 550 550 550 550
Insurance 200 200 200 200 200 200 200 200 200 200 200 200
Repair
and
maintenance
s
625 625 625 625 625 625 625 625 625 625 625 625
Rent 700
0
700
0
700
0
700
0
700
0
700
0
700
0
700
0
700
0
700
0
700
0
700
0
Depreciation
750 750 750 750 750 750 750 750 750 750 750 750
Total fixed
Overhead
cost
314
00
204
65
223
10
179
00
117
35
152
00
128
60
115
10
270
35
214
10
216
35
251
45
Total
overhead
cost
494
90
296
42.7
5
332
38.2
5
252
44
137
06
203
23.2
5
159
65
133
21.
25
418
17.5
312
85.2
5
317
73.5
381
65.7
5
Less:
depreciation
750 750 750 750 750 750 750 750 750 750 750 750

Strategic Financial Management 23
Cash
payment for
overheads
487
40
288
92.7
5
324
88.2
5
244
94
129
56
195
73.2
5
152
15
125
71.
25
410
67.5
305
35.2
5
310
23.5
374
15.7
5
Monthly operating cost budget
Jan-
18
Feb-
18
Mar
-18
Apr-
18
Ma
y-
18
Jun-
18
Jul-
18
Aug
-18
Sep-
18
Oct-
18
Nov-
18
Dec-
18
Expenses:
Utilities 50 50 50 50 50 50 50 50 50 50 50 50
Insurance 600
0
600
0
600
0
600
0
600
0
600
0
600
0
600
0
600
0
600
0
600
0
600
0
Administratio
n Staff Wages
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
General
Office
Expenses
150
0
150
0
150
0
150
0
150
0
150
0
150
0
150
0
150
0
150
0
150
0
150
0
Rent 140
0
140
0
140
0
140
0
140
0
140
0
140
0
140
0
140
0
140
0
140
0
140
0
Total
monthly cost
budget
114
50
114
50
114
50
114
50
114
50
114
50
114
50
114
50
114
50
114
50
114
50
114
50
Inventory Budget for the finished goods
Jan-
18
Feb-
18
Mar
-18
Apr-
18
Ma
y-
18
Jun-
18
Jul-
18
Aug
-18
Sep-
18
Oct-
18
Nov-
18
Dec-
18
Copper 225
0
105
0
135
0
850 100 550 350 100 185
0
115
0
120
0
165
0
Desired
inventory
level for
finished
goods
Copper 112
5
525 675 425 50 275 175 50 925 575 600 825
Platinum 150 85 75 50 15 15 20 20 110 95 90 105
Total
inventory
247
5
126
0
146
5
975 290 675 415 265 199
0
136
5
139
0
178
0

Strategic Financial Management 24
Cost of sales budget
Sales Units Jan-
18
Feb-
18
Mar
-18
Apr-
18
Ma
y-
18
Jun-
18
Jul-
18
Aug
-18
Sep-
18
Oct-
18
Nov-
18
Dec-
18
Copper 150
0
120
0
130
0
100
0
400 500 400 200 130
0
120
0
120
0
150
0
Diamond 120
0
110
0
116
0
100
0
600 700 500 400 116
0
110
0
110
0
120
0
Iron ore 400 300 260 140 80 40 40 40 260 300 300 400
Platinum 200 180 160 120 60 40 40 40 160 180 180 200
Selling unit
Copper 100 100 100 100 100 100 100 100 100 100 100 100
Diamond 75 75 75 75 75 75 75 75 75 75 75 75
Iron ore 45 45 45 45 45 45 45 45 45 45 45 45
Platinum 65 65 65 65 65 65 65 65 65 65 65 65
Sales
Revenue
Copper $
1,50
,000
$
1,20
,000
$
1,30
,000
$
1,00
,000
$40
,00
0
$50,
000
$40
,00
0
$20
,00
0
$
1,30
,000
$
1,20
,000
$
1,20
,000
$
1,50
,000
Diamond $90,
000
$82,
500
$87,
000
$75,
000
$45
,00
0
$52,
500
$37
,50
0
$30
,00
0
$87,
000
$82,
500
$82,
500
$90,
000
Iron ore $18,
000
$13,
500
$11,
700
$6,3
00
$3,
600
$1,8
00
$1,
800
$1,
800
$11,
700
$13,
500
$13,
500
$18,
000
Platinum $13,
000
$11,
700
$10,
400
$7,8
00
$3,
900
$2,6
00
$2,
600
$2,
600
$10,
400
$11,
700
$11,
700
$13,
000
cost of sales $
4,70
,624
$
1,68
,778
$
2,48
,578
$
1,52
,712
$39
,69
8
$
1,36
,468
$74
,18
1
$53
,57
1
$
3,76
,560
$
2,02
,483
$
2,28
,567
$
2,98
,743
Monthly cash budget
Beginning
cash balance
£
4,82
5
-£
3,64
6
-£
5,38
5
£
2,18
4
£
7,7
96
1,5
1,96
8
1,8
0,5
32
1,8
7,2
67
2,0
5,85
2
1,6
3,73
1
1,5
6,62
7
2,1
7,49
8
ADD:
Budgeted
cash receipts
£
21,6
80
£
29,0
56
£
28,2
36
£
24,6
92
£
14,
964
£
12,2
52
£
10,
828
£
7,6
28
£
21,3
04
£
27,7
80
£
27,3
24
£
30,7
88
Total cash
available
2,6
5,05
0
2,5
4,10
2
2,2
8,51
2
2,6
8,76
0
2,2
7,5
95
2,7
4,48
8
2,8
8,8
12
2,6
3,5
47
4,1
8,89
2
4,4
1,53
1
4,2
9,86
7
5,2
5,37
8

Strategic Financial Management 25
Less: cash
disbursement
Direct
Material
£
7,24
8
£
18,1
95
£
6,07
4
£
8,63
2
£
3,2
83
£
1,51
2
£
4,5
90
£
1,6
77
£
6,46
7
£
15,0
75
£
7,52
7
£
10,2
53
Direct Labour £
16,8
84
£
8,56
6
£
10,2
00
£
6,85
4
£
1,8
40
£
4,78
2
£
2,8
98
£
1,6
91
£
13,7
97
£
9,21
7
£
9,46
3
£
12,1
53
Overhead £
4,87
4
£
2,88
9
£
3,24
9
£
2,44
9
£
1,2
96
£
1,95
7
£
1,5
22
£
1,2
57
£
4,10
7
£
3,05
4
£
3,10
2
£
3,74
2
Operating
cost
£
1,14
5
£
1,14
5
£
1,14
5
£
1,14
5
£
1,1
45
£
1,14
5
£
1,1
45
£
1,1
45
£
1,14
5
£
1,14
5
£
1,14
5
£
1,14
5
Total
disbursement
£
30,1
51
£
30,7
95
£
20,6
67
£
19,0
80
£
7,5
63
£
9,39
6
£
10,
155
£
5,7
70
£
25,5
16
£
28,4
90
£
21,2
37
£
27,2
93
Cash surplus -£
3,64
6
-£
5,38
5
£
2,18
4
£
7,79
6
1,5
1,9
68
1,8
0,53
2
1,8
7,2
67
2,0
5,8
52
1,6
3,73
1
1,5
6,62
7
2,1
7,49
8
2,5
2,45
3
Budgeted
ending cash
inventory
-£
3,64
6
-£
5,38
5
£
2,18
4
£
7,79
6
1,5
1,9
68
1,8
0,53
2
1,8
7,2
67
2,0
5,8
52
1,6
3,73
1
1,5
6,62
7
2,1
7,49
8
2,5
2,45
3

Strategic Financial Management 26
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Strategic Financial Management 27
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Strategic Financial Management 28
Appendix:
Refer to attached spreadsheet