CASE IN FINANCIAL MANAGEMENT CASE 14 Cash Budget/ cash flow Team
members: 1. Nusaibah ROSLAN 2. Idarahayu ayob 3. Raymond LUCKY
SUMARGO
CASE IN FINANCIAL MANAGEMENTCASE 14 Cash Budget/ cash flow
Team members:1. Nusaibah ROSLAN2. Idarahayu ayob3. Raymond LUCKY
SUMARGO11Background of Triad campersFounder - Tim CookBuild camping
trailersCustomize and sell trailers from inventoryTerms of sale
2/10, net 9010% of sales paid within 10 days75% of sales paid after
90 days12% paid within 120 days and 3% uncollectableTriad Campers
had cash flow problem due to increase in the time dealers took to
pay
2informationCOGS : 62% of salesG& A expense : 8.8%
Depreciation and interest : ConstantTax: 38%Purchases: 32%Salaries:
$4,200Wages: 19.6% of salesDirect factory: 4.9% of
salesAdministration expense: increase $500 per monthSelling
expenses: 7.8% of salesLease payment July: $19,000Tax payment
September: $19,800Cash balance: $15,000
3ANSWERS
Question 14
ANSWERSQuestion 2Tim firm already borrowed $57,000 on its
$60,000 line of credit from the bank by the end of June. He will
need to increase lines of credit at least 21,000. If the increase
is not granted, Tim needs to restrict his growth
rates.5ANSWERSQuestion 3
As the sale revenue growing, the needs to borrow also
growing.
6
ANSWERSQuestion 4
7
ANSWERS8answersQuestion 6Difference between profit and cash
flow. How profitable firm can experience cash crunches and have a
need for outside capital.
Cash FlowProfitMoney in and out from operations, financing and
investing activitiesRemains from sales revenue (net
income)Concerned with the time at which the movement of money takes
placeLooks at income and expenses at a certain point in
timeIndication of companys strength. Goal is to ensure firms
solvency, generate positive cash flow and maximize share priceSales
made beyond a breakeven pointRecord transaction when money is
actually paid or receivedBased on accrual concept transactions
recorded in the period in which they occur regardless of whether
the cash is received or notCash crunch company needs to prioritize
payment and increase collection efforts. Caused by drop in revenue,
overcrowded inventory, undercapitalization, allow expenses to drive
revenue9Reference for cash flow & profit10
answersQuestion 7Cash budget is important financial tool for
small firm or large firm?Cash budget is important financial tool
for small firm like Triad Campers rather than large firm.Larger
firms tend to have steady cash flow after a long period of business
and financing institutions are more interested with their
profitability.11SCENARIO ANALYSISChange in Desired CashDesired
Cash: $ 20,000
12SCENARIO ANALYSISDesired Cash: $ 20,000Proportion of sales to
avoid cash crunch: 90% of the original
90% of expected sales13
