Wegmans
American International University – Bangladesh
Entrepreneurship Development
Exercise
Douglas Martinez, owner of a plumbing supply company must prepare a cash budget as part of his loan application package. Douglas has a monthly sales forecast and credit collection history to go along with his current cash balance that provides the basis for the preparation of his cash budget.
* Martinez has established a minimum cash balance of $2,000. * Current cash balance $8,750 * Sales pattern 71% on credit and 29% in cash * Collections of credit sales 68% in 1 to 30 days; 19% in 31 to 60 days; 7% in 61 to 90 days; 6% never collected (bad debts). * Sales forecasts: Most Likely July (actual) $18,750 August (actual) $19,200 September (actual) $17, 840 October $17,500 November $16,500 December $13,000 January $12,500 * Utilities expenses $800 per month. * Rent $1,200 per month * Truck loan $317 per month * The company's wages and salaries (including payroll taxes) estimates are: October $2,050 November $1,825 December $1,725 January $1,725 * The company pays 63 percent of the sales price for the inventory it purchases, an amount that it actually pays in the following month. (Martinez has negotiated "net 30" credit terms with his suppliers.) * Other expenses include: Office supplies $95 per month Maintenance $75 per month Computer supplies $75 per month Advertising $550 per month Legal and accounting fees
Entrepreneurship Development
Exercise
Douglas Martinez, owner of a plumbing supply company must prepare a cash budget as part of his loan application package. Douglas has a monthly sales forecast and credit collection history to go along with his current cash balance that provides the basis for the preparation of his cash budget.
* Martinez has established a minimum cash balance of $2,000. * Current cash balance $8,750 * Sales pattern 71% on credit and 29% in cash * Collections of credit sales 68% in 1 to 30 days; 19% in 31 to 60 days; 7% in 61 to 90 days; 6% never collected (bad debts). * Sales forecasts: Most Likely July (actual) $18,750 August (actual) $19,200 September (actual) $17, 840 October $17,500 November $16,500 December $13,000 January $12,500 * Utilities expenses $800 per month. * Rent $1,200 per month * Truck loan $317 per month * The company's wages and salaries (including payroll taxes) estimates are: October $2,050 November $1,825 December $1,725 January $1,725 * The company pays 63 percent of the sales price for the inventory it purchases, an amount that it actually pays in the following month. (Martinez has negotiated "net 30" credit terms with his suppliers.) * Other expenses include: Office supplies $95 per month Maintenance $75 per month Computer supplies $75 per month Advertising $550 per month Legal and accounting fees