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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 next year

  

200,000

 

Sales for February next year

  

200,000

 

Monthly Rent

  

11,000

 

Staff Wages per month

  

25,000

 

Advertising per month

  

3,000

 

Phone per month

  

500

 

Utilities per month

  

800

 

Office Supplies per month

  

450

 

Insurance paid each 6 months

  

7,000

 

Insurance Payments in January and July

   

Property Taxes on Inventory and real property

 

15,000

 

Property taxes paid in November

    

Purchase Computers in March

  

150,000

 

Beginning Cash Balance January 1

  

10,000

 

Owners Draw Per Month

  

10,000

 

Interest Rate on Working Capital Loan

 

14%

per year

  Interest Compounded Annually on Working Capital Loan

 Interest Paid on Outstanding Principal Balance each month

 

Your annual sales are distributed through the 12 months (January through December) as follows:  May, June, July, August are each 5 percent of annual sales.  All other months are each 10 percent of annual sales.

 

There is an excel format example of the cash budget in the week 4 required section.  This excel spreadsheet can be used as a general template for preparing your homework assignment.  Remember that the example spreadsheet will have different data and timing of various cash flows. 

 

 

 

 

 

 

Assignment:

 

1.      Create a monthly cash budget that contains four separate sections (which are shown in the online lecture example and also in the excel spreadsheet example).  The four sections are Key Assumptions, Cash Budget, Working Capital Loan, and Summary of cash flows. The four sections should be in the same order as shown in the excel example and in the online lecture.   The cash budget should cover 12 months starting with January and ending in December.  (10 points for setting up the four sections)

 

2.      Create a 12-month cash budget with the four sections that does not include a working capital loan.   Use the data and information provided above.  Your working capital loan section will be blank or zero.  (25 points)

 

3.      Add a working capital loan of 50,000 dollars in June and repayment of the entire 50,000 dollar balance in October.  Show all four sections of the cash budget with the working capital loan information included.  (15 points)

 

 

Please post your results in an excel format attachment in the assignments section by midnight of the last day of the week in which it is assigned.

 

 

 

 

 

 

 

 

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