Cash Flows for Discounting Calculations When managers are forecasting the cash flows for a project‚ they will consider the expected revenues and costs‚ but they must also include an estimate for working capital requirements. The working capital will be required in period 1 to allow the business to acquire inventories and build up debtors (receivables) to the extent that these are not matched by trade. The working capital will be recovered at the end of the project when the inventories are sold‚
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Introduction For this piece of assignment‚ a cash budget will be made for Doomy Corporation for the second quarter of the year. For this budget‚ all the sales figures for the second quarter and some of the expenditure have been given. Hence‚ to prepare a cash budget‚ the sales figure given will be used and some calculations will be worked out in order to fully prepare an outstanding budget for Doomy Corporation the following information will be used efficiently. “Doomy Corporation‚ a rapidly expanding
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Cash Flow Problems In this task I will be analyzing the cash flow problems a business might experience by giving examples and describing how and why they cause cash flow problems in a business. The cash flow problems a business may experience can be: - CUSTOMERS TAKE TOO LONG TO PAY This is when a customer purchases an item without paying which leads the customer into a debt as it owes the company money. They then take too long to pay back the money which means that the company has sold
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Case Study 3 - Cash Budget SCHEDULE OF EXPECTED CASH COLLECTIONS FROM CUSTOMERS: Credit Sales August September July ($30‚000 x 40%) 12‚000 August ($24‚000 x 60%)‚ September ($24‚000 x 40%) 14‚400 9‚600 September ($18‚000 x 60%) 10‚800 Total Cash Collections 26‚400 20‚400 SCHEDULE FOR EXPECTED PAYMENTS FOR PURCHASE OF INVENTORY Inventory purchases August September July ($65‚000 x 50%) 32‚500 August ($45‚000 x 50%)
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Research” Accounting & Business Research Winter86‚ Vol. 17 Issue 65‚ p21-32. Onsi‚ M. (1973) “Factor Analysis of Behavioral Variables Affecting Budgetary Slack” Accounting Review Jul73‚ Vol. 48 Issue 3‚ p535-548 Otley‚ D.T Prendergast‚ P. (1997) “Budget padding: Is it a job for the finance police?” Management Accounting: Magazine for Chartered Management Accountants Nov97‚ Vol. 75 Issue 10‚ p44 Public Bank (2002)‚ Annual Report 2002 Public Bank (2003)‚ Annual Report 2003. Available: http://ww2.publicbank
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than expected in the budget‚ or * Revenue/profits were higher than expected By contrast‚ an adverse variance might arise because: * Costs were higher than expected * Revenue/profits were lower than expected What causes budget variance? There are four key reasons and it is important that good managers recognise the differences‚ because the action required is may be completely different in each case. The four reasons are: 1. Faulty Arithmetic in the Budget Figures 2. Errors in
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Week 4 Cash Budget Homework Assignment You are the owner of a shop in your local mall that sells shirts. You buy your shirts from wholesalers‚ mark them up and sell them to the public. Below is data on your business you have collected. Annual Sales of your business 2‚000‚000 All sales are cash sales Inventory Purchases made 60 days before sales made Shirt price is 100 percent markup from wholesale price (Wholesale price as percentage of sale price) = 50% Sales for January
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Cash Budget Problem Answer the following questions using the information below: The following information pertains to Hepburn Company: Month Sales Purchases January $60‚000 $32‚000 February $80‚000 $40‚000 March $100‚000 $56‚000 ∙ Cash is collected from customers in the following manner: Month of sale 30% Month following the sale 70% ∙ 40% of purchases are paid for in cash in the month of purchase‚ and the balance is paid the following month. ∙ Labor costs are 20% of sales. Other
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Accounting ; Budgets 1. Define the term Budget. A Budget is an estimate of income and expenditure over a specified period‚ reflecting a reading of future finsncial conditions and goals. It is an itemized summary of estimated or intended expenditures for a given period along with proposals for financing them. 2. Name and briefly describe six benefits that a business can gain from budgeting. The budgeting process can have a good motivational impact by involving managers
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Using this online NPV Calculation Tool http://finance.thinkanddone.com/online-n… we get the following NPV at 15% Net Cash Flows CF0 = -3000000 CF1 = 1100000 CF2 = 1450000 CF3 = 1300000 CF4 = 950000 Discounted Net Cash Flows DCF1 = 1100000/(1+0.15)^1 = 1100000/1.15 = 956521.74 DCF2 = 1450000/(1+0.15)^2 = 1450000/1.3225 = 1096408.32 DCF3 = 1300000/(1+0.15)^3 = 1300000/1.52087 = 854771.1 DCF4 = 950000/(1+0.15)^4 = 950000/1.74901 = 543165.58 NPV Calculation NPV = 956521.74
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