•Beginning cash balance: ₹600,000
•Minimum cash balance requirement: ₹400000
•Interest rate on short-term borrowing: 1.5% per month
•Cash Inflows:
•Expected inflows without discounts:
•January: ₹500,000
•February: ₹600,000
•March: ₹700,000
Beginning cash balance
Variable expense
•Questions:
[Link] the adjusted cash inflow for each month, assuming the company offers
[Link] total cash outflows for each month, accounting for fixed expenses, va
[Link] the net cash flow and ending cash balance for each month.
[Link] the short-term financing needs, if any, for each month to maintain the m
[Link] XYZ Ltd. has to borrow to meet the minimum cash balance, calculate the intere
[Link] how offering a discount affects XYZ’s financing needs: Calculate and com
e: ₹600,000
e requirement: ₹400000
term borrowing: 1.5% per month
out discounts:
600000
20% Of cash inflow
d cash inflow for each month, assuming the company offers the early payment discount.
outflows for each month, accounting for fixed expenses, variable expenses, and any capital expenditures.
h flow and ending cash balance for each month.
m financing needs, if any, for each month to maintain the minimum cash balance of ₹400,000.
ow to meet the minimum cash balance, calculate the interest expense for each month and add it to the next month's outflows.
a discount affects XYZ’s financing needs: Calculate and compare the total short-term financing needed with and without offering the early
Cash Outflows:
1. Fixed Operating Expenses:
January: ₹400,000
February: ₹450,000
March: ₹500,000
2. Variable Expenses: 20% of monthly cash inflow.
3. Capital Expenditure: ₹300,000 in February.
Min cash balance 150000
Discount offered 5%
Inflow increase due to discount 20%
it to the next month's outflows.
needed with and without offering the early payment discount.
Selected financial data of Future Technologies,
Year 1, are shown below
($ )
Cash 42000
Accounts receivable 90000
Inventory 39000
Fixed assets 120000
Accumulated depreciation 25800
The following additional information is availab
December 31, Year 1:
($ )
Sales 450000
Cost of goods sold 312000
Purchases 210000
For Year 2, Future Technologies anticipates a 5% sales growth. To
counterbalance this lower than expected growth rate, the company
implements cost-cutting strategies to reduce cost of goods sold by 2%
from the Year 1 level. All other expenses are expected to increase by
5%. Expected net income for Year 2 is $20,000. Ending Year 2 inventory
is estimated at $90,000 and there is no expected balance in accrued
taxes. The company requires $175,000 to buy new equipment in Year
2. The minimum desired cash balance is $30,000. Consolidated
Technologies is considering a change in credit policy where ending
accounts receivable reflect 60 days of sales. What impact does this
change have on the company’s cash balance? Will this change affect
the company’s need to borrow
uture Technologies, Inc., at December 31,
, are shown below:
Accounts payable 78000
Notes payable 21000
Accrued taxes 10800
Capital stock 120000
Retained earnings 35400 Less:
ormation is available for the year ended
ember 31, Year 1:
Depreciation 15000
Net income 12000
Less :
les growth. To
, the company
ods sold by 2%
to increase by
Year 2 inventory
nce in accrued
uipment in Year
. Consolidated
where ending
mpact does this
s change affect
Cash, January 1, Year 2
Cash collection
Accounts receivable, Jan 1, Year 2
Sales
Accounts receivable, Dec 31, Year 2*
Total cash available
Cash disbursements
Accounts payable, Jan 1, Year 2
Purchases**
Accounts payable, Dec 31, Year 2***
Accrued taxes paid
Other expenses****
Total disbursements
Cash available, Dec 31, Year 2
Cash needed for equipment
Cash balance desired
Deficiency/Access in cash (Retain/need to borrow)
Future Technologies, Inc.
Cash Forecast
For Year Ended December 31, Year 2
Selected financial data of Future Technologies,
Year 1, are shown below
($ )
Cash 42000
Accounts receivable 90000
Inventory 39000
Fixed assets 120000
Accumulated depreciation 25800
The following additional information is availab
December 31, Year 1:
($ )
Sales 450000
Cost of goods sold 312000
Purchases 210000
For Year 2, Future Technologies anticipates a 5% sales growth. To counterbalance this lower than expected growth rate, the
to reduce cost of goods sold by 2% from the Year 1 level. All other expenses are expected to increase by 5%. Expected net
inventory is estimated at $90,000 and there is no expected balance in accrued taxes. The company requires $175,000 to buy n
The minimum desired cash balance is $30,000. The company offers a discount of 2% of sales if payment is received in 10 days.
Required: Prepare a what-if analysis of c
forecast) for Year 2. Will Future Technolo
borrow money?
uture Technologies, Inc., at December 31,
, are shown below:
Accounts payable 78000
Notes payable 21000
Accrued taxes 10800
Capital stock 120000
Retained earnings 35400 Less:
ormation is available for the year ended
ember 31, Year 1:
Depreciation 15000
Net income 12000
Less :
expected growth rate, the company implements cost-cutting strategies
crease by 5%. Expected net income for Year 2 is $20,000. Ending Year 2
y requires $175,000 to buy new equipment in Year 2.
ment is received in 10 days. It is expected that 10% of sales take advantage of this discount, while the remaining 90% are collected (on ave
nalysis of cash needs (cash
e Technologies need to
Cash, January 1, Year 2
Cash collection
Accounts receivable, Jan 1, Year 2
Sales
Accounts receivable, Dec 31, Year 2*
Total cash available
Cash disbursements
Accounts payable, Jan 1, Year 2
Purchases**
Accounts payable, Dec 31, Year 2***
Accrued taxes paid
Other expenses****
Total disbursements
Cash available, Dec 31, Year 2
Cash needed for equipment
Cash balance desired
Deficiency/Access in cash (Retain/need to borrow)
scount, while the remaining 90% are collected (on average) in 60 days .
Future Technologies, Inc.
Cash Forecast
For Year Ended December 31, Year 2
