Question

For 2015, calculate cash build and cash burn, and the expected remaining months of “until out of cash” period .

             Balance Sheet Information

2014 2015

Cash                                                    $50,000           $60,000

Accounts Receivables 200,000           290,000

Inventories   450,000           550,000  

Net Fixed Assets   300,000            380,000

Total Assets $1,000,000         $1,280,000

Accounts Payable 130,000            $150,000

Accruals 50,000 80,000

            Income Statement   2015

Net Sales $1,500,000

Cost of Goods Sold   950,000

Gross Profit 550,000

Marketing Expenses 180,000

General & Admin Expenses 150,000

Depreciation   55,000  

EBIT 165,000

Interest   75,000

Earnings Before Taxes 90,000

Income Taxes (40% rate)   36,000

Net Income $54,000

Answer 1

Please find the below explanation and “ Don’t forget to give a like! Thank you”

Cash Build = Net Sales – Increase in receivables

= $1500000 – ( $290000 – $200000)

= $1500000 – $90000

= $1410000

The cash build is $1410000

calculation of cash burn

cash Burn = income statement based operating, Interest and tax expenses + increase in

Inventories – ( changes in payables + accrued liabilities) + capital expenditures

Operating expenses = cost of goods sold + marketing expenses + General & Admin expenses

= $950000 + $180000 + $150000

= $1280000

Other cash expenses = interest + taxes

= $75000 + $36000

= $111000

Increase in inventories = $550000 – $450000

= $100000

changes in payables and accrued liabilities = ( $150000 – $130000) + ( $80000 – $50000)

= $20000 + $30000

= $50000

Capital expenditures = change in net fixed assets plus depreciation

= ( 380000 – 300000) + $55000

= $80000 + $55000

= $135000

cash Burn = $1280000 + $111000 + $100000 – $50000 + $135000

= $1576000

The cash burn is $1576000

calculation of expected remaining months of “until out of cash” period

Net cash burn = cash burn – cash build

= $1576000 – $1410000

= $166000

Net cash burn monthly rate = $166000 / 12 = $13833.33

Months until out of cash = 60000 / $13833.33

= 4.34 months