Information Management & Financial Analysis for HR Managers Seminar TEN: Cash Budget Revision Exercise

Activity: Prepare a Cash Budget for Jan, Feb and March Travis is a retail business selling goods to customers by cash and credit terms. Budgeted Cash information is as follows: All £ (000) Oct Nov Dec Jan Feb Mar Credit Sales 300 400 250 320 280 Cash Sales 160 120 125 175 180 190 Credit Purchases 220 260 Other Operating Costs 135 170 185 75% of Credit Sales are paid in the following month, 10% is paid on 2 months, 12% is paid after 3 months and the remainder is written off as bad debt 65% of Credit Purchases are paid the month after purchase, the remainder is paid 2 months after purchase All operating costs are paid in the month to which they occur Travis has placed an order for new IT equipment worth £60,000. Scheduled payment is February The Cash balance on the 1st January is £40,000

Activity: Prepare a Cash Budget for Jan, Feb and March Credit Sales Receipts All £ (000) Total Sales Jan Feb Mar October 300 36 November 400 40 48 December 250 187.5 25 30 January 320 240 32 February Total 263.5 313 302

Activity: Prepare a Cash Budget for Jan, Feb and March Credit Purchases Payments All £ (000) Total Purchases Jan Feb Mar November 220 77 December 260 169 91 January 250 162.5 87.5 February Total 246 253.5

Activity: Prepare a Cash Budget for Jan, Feb and March Solution: Cash Budget All £ (000) Jan Feb Mar Cash Sales 175 180 190 Receipts from Credit Sales 263.5 313 302 Total Receipts 438.5 493 492 Payments for Purchases (246) (253.5) (250) Expenses Paid (175) (170) (185) IT Equipment Payment (60) Total Payments (421) (483.5) (435) Net Cash 17.5 9.5 57 Opening Balance 40 57.5 67 Closing Balance 124