Scribd Logo
Upload

Welcome to Scribd!

  • 78 views

    Collections:: Less: Disbursement

    Uploaded by

    Mukul Kadyan
    The document contains 8 problems related to cash management for various companies, including cash budget projections, calculations of interest savings from improved cash collection and payment processes, and analysis of costs associated with cash transfers. Information provided includes sales, collection, and payment amounts over multiple periods, as well as interest rates and borrowing terms for the companies. Solutions to the problems involve calculating cash balances, borrowing needs, and potential savings from reducing collection and payment times.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Collections:: Less: Disbursement

    Uploaded by

    Mukul Kadyan
    78 views5 pages
    The document contains 8 problems related to cash management for various companies, including cash budget projections, calculations of interest savings from improved cash collection and payment processes, and analysis of costs associated with cash transfers. Information provided includes sales, collection, and payment amounts over multiple periods, as well as interest rates and borrowing terms for the companies. Solutions to the problems involve calculating cash balances, borrowing needs, and potential savings from reducing collection and payment times.

    Original Title

    CH-30

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document contains 8 problems related to cash management for various companies, including cash budget projections, calculations of interest savings from improved cash collection and payment processes, and analysis of costs associated with cash transfers. Information provided includes sales, collection, and payment amounts over multiple periods, as well as interest rates and borrowing terms for the companies. Solutions to the problems involve calculating cash balances, borrowing needs, and potential savings from reducing collection and payment times.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    78 views5 pages

    Collections:: Less: Disbursement

    Uploaded by

    Mukul Kadyan
    The document contains 8 problems related to cash management for various companies, including cash budget projections, calculations of interest savings from improved cash collection and payment processes, and analysis of costs associated with cash transfers. Information provided includes sales, collection, and payment amounts over multiple periods, as well as interest rates and borrowing terms for the companies. Solutions to the problems involve calculating cash balances, borrowing needs, and potential savings from reducing collection and payment times.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 5

    Chapter 30: Cash Management

    Problem 1

    KHANNA MANUFACTURING COMPANY


    CASH BUDGET
    For the period from January to June 1998
    Dec Jan Feb Mar
    Sales 60,000 84,000 156,000 132,000
    Credit sales 70% 42,000 58,800 109,200 92,400
    Collections:
    Cash 30% 25,200 46,800 39,600
    First month 70% 42,000 58,800 109,200
    Total Collections 67,200 105,600 148,800
    Purchases 75% 63,000 117,000 99,000
    Payments:
    Preceding month 100% 63,000 117,000 99,000 171,000
    Total Payments 117,000 99,000 171,000

    Total Collections (A) 67,200 105,600 148,800


    Less: Disbursement
    Payments for purchases 117,000 99,000 171,000
    Wages & salaries 9,600 9,600 9,600
    Rent 2,400 2,400 2,400
    Others 1% 840 1,560 1,320
    Total Disbursement (B) 129,840 112,560 184,320
    Surplus/(Deficit) [A-B] -62,640 -6,960 -35,520
    Opening cash balance 84,480 21,840 14,880
    Total cash 21,840 14,880 -20,640
    Current borrowing 0 0 22,000
    Interest on borrowing 0 0 0
    Closing cash balance 21,840 14,880 1,360
    Cumulative borrowing 0 0 22,000
    Cumulative interest 0 0 0
    Notes:
    Annual Monthly
    Borrowing rate 18% 0.015

    Problem 2

    Kay Company
    Cash Budget
    For the period January to March 19..
    Dec Jan Feb Mar
    Sales 520,000 500,000 600,000 750,000
    Credit sales 20% 104,000 100,000 120,000 150,000
    Collections:
    Cash 80% 400,000 480,000 600,000
    First month 20% 104,000 100,000 120,000
    Total Collections 504,000 580,000 720,000
    Purchases 40% 208,000 200,000 240,000 300,000
    Payments:
    First month 40% 208,000 200,000 240,000
    Total Payments 208,000 200,000 240,000

    Total Collections (A) 504,000 580,000 720,000


    Less: Disbursement
    Payments for purchases 208,000 200,000 240,000
    Salaries 280,000 280,000 280,000
    Dividend 75,000 0 0
    Misc. expense 15,000 15,000 15,000
    Bills payable 0 36,000 0
    Capital expenditure 0 80,000 190,000
    Total Disbursement (B) 578,000 611,000 725,000
    Surplus/(Deficit) [A-B] -74,000 -31,000 -5,000
    Opening cash balance 500,000 500,000 500,000
    Total cash 426,000 469,000 495,000
    Interest income (exp.) 0 1,110 1,592
    Current borrowing 74,000 32,110 6,592
    Current investment 0 0 0
    Closing cash balance 500,000 500,000 500,000
    Cumulative investment/(borrowing) 74,000 106,110 112,702
    Cumulative interest income/(exp) 0 1,110 2,702

    Minimum cash balance 500,000


    Annual Quarterly Monthly
    Borrowing rate 18% 0.045 0.015
    Lending 15% 0.0375 0.0125

    Problem 3

    Kamp Manufacturing Company


    Cash Budget
    For the period May to July
    Jan Feb Mar Apr
    Sales 75,500 75,000 90,000 90,000
    Credit sales 40% 30,200 30,000 36,000 36,000
    Collections:
    Cash 60% 45,300 45,000 54,000 54,000
    First month 50%
    Second month 50%
    Total Collections
    Purchases 75% 56,625 56,250 67,500 67,500
    Payments:
    First month 80%
    Second month 20%
    Total Payment
    Total Collections (A)
    Less: disbursement
    Payments for manufacturing
    Fixed operating expenses
    Variable operating expenses 10%
    Interest 12%
    Advance taxes
    Capital expenditure
    Total Disbursement (B)
    Surplus/(Deficit) [A-B]
    Opening cash balance
    Total cash
    Current borrowing
    Closing cash balance
    Cumulative borrowing
    Minimum cash balance 30,000

    Problem 4
    A. Average credit sales (Rs) 1,500,000
    B. Working days in a year 300
    C. Sales per day (Rs) [A/B] 5,000
    D. Processing time saved (days) 2
    E. Amount (Rs) [C x D] 10,000
    F. Interest rate 18%
    G. Interest saved (Rs) [E x F] 1,800

    Problem 5

    A. Daily collections (Rs) 200,000


    B. Reduction in float (days) 4
    C. Amount (Rs) [A x B] 800,000
    D. Minimum balance with bank (Rs) 400,000
    E. Opportunity cost 15%
    F. Net interest saving (Rs) [(C - D) x E ] 60,000

    G. Fixed fee (Rs) 20,000


    H. Net interest saving (Rs) [C x E - G] 100,000

    Problem 6

    A. Daily collections (Rs) 500,000


    B. Required rate of return 10%
    C. Administration time (days) 6
    D. Total opportunity cost (Rs) [A x B x C] 300,000

    E. Reduction in admin. time (days) 3


    F. Reduced cash balance (Rs) [(C - E) x A] 1,500,000

    Problem 7

    A. Annual turnover (Rs) 97,000,000


    B. Daily turnover (Rs) 269,444
    C. Reduction in collection time (days) 2
    D. Amount (Rs) [B x C] 538,889
    E. Borrowing rate 18%
    F. Net savings (Rs) 63,050

    Problem 8

    A. Amount to be transferred (Rs) 1,500,000


    B. Mailing cost (Rs) 10
    C. Transit time (days) 10
    D. Opportunity cost 12%
    E. Total cost (Rs) [B + (A x C x D/365)] 4,942
    Apr May Jun Jul
    228,000 288,000 108000 108000
    159,600 201,600 75,600 75,600

    68,400 86,400 32,400 32,400


    92,400 159,600 201,600 75,600
    160,800 246,000 234,000 108,000
    171,000 216,000 81,000 81,000

    216,000 81,000 81,000


    216,000 81,000 81,000

    160,800 246,000 234,000

    216,000 81,000 81,000


    9,600 9,600 9,600
    2,400 2,400 2,400
    2,280 2,880 1,080
    230,280 95,880 94,080
    -69,480 150,120 139,920
    1,360 1,550 151,670
    -68,120 151,670 291,590
    70,000 0 0
    330
    1,550 151,670 291,590
    92,000 92,000 92,000
    330 330 330
    May Jun Jul
    105,000 120,000 150,000
    42,000 48,000 60,000

    63,000 72,000 90,000


    18,000 21,000 24,000
    18,000 18,000 21,000
    99,000 111,000 135,000
    78,750 90,000 112,500

    54,000 63,000 72,000


    13,500 13,500 15,750
    67,500 76,500 87,750
    99,000 111,000 135,000

    67,500 76,500 87,750


    15,000 15,000 15,000
    10,500 12,000 15,000
    27,000
    15,000
    60,000
    93,000 163,500 159,750
    6,000 -52,500 -24,750
    30,000 36,000 30,000
    36,000 -16,500 5,250
    0 13,500 24,750
    36,000 30,000 30,000
    0 13,500 38,250

    You might also like