Question

Question 11 [15 marks]

Global Sweet Imports (Pty) Ltd imports sweets from Italy and sells the sweets to local retailers in Cape Town. The financial manager provided you with the following information and requires your assistance in compiling the cash budget for the next 3 months (August, September and October).

• Sales for June was R450 000 and July was R500 000. The budgeted sales for the next three months are:
  • August – R550 000
  • September – R300 000
  • October – R600 00
  • • 30% of sales are for cash, 60% is collected in the next month, the remaining 10% is collected in the 2^nd month following the sale.
  • The expected purchases are as follows, paid 50% cash and 50% in the next month,
    • July – R375 000 actual
    • August – R350 000
    • September – R400 000
    • October – R200 000
  • Lease payments are R15 000 per month
  • Wages and Salaries are 15% of the previous month’s sales
  • Cash dividends of R35 000 will be paid in September
  • Payment of principal and interest of R20 000 is due in August
  • Taxes of R50 000 are due in October
  • Global Sweet Imports (Pty) Ltd sub-leases part of the warehouse and receives R7000 per month cash from the sub-tenant
  • A cash purchase of equipment costing R400 000 is scheduled for December
  • Global Sweet Imports (Pty) Ltd has a cash balance of R110 000 on 1 August and wishes to maintain a minimum cash balance of R200 000 going forward

  • Required:

    Complete the cash budget for August, September and October by using the template with the below info:

  • Sales, cash, 1 month lag, 2 month lag, rental, total cash receipt

  • Purchases, cash,1 month lag, lease pmts, wages & salaries, dividends, principal + interest, taxes, cash disbursements

  • Net cash flow, Add: begin cash, ending cash, less minimum cash balance, total financing required

Answer 1

		Collection in August from July Sales(One month lag)	300,000	(500000*60)%
		Collection in August from June Sales(Two month lag)	45,000	(450000*10%)
		Payment in August for Purchase of July(One month lag)	187500	(375000*50%)
		Wages and Salaries of August=15%*500000=	75,000
			June	July	August	September	October
		Sales	450,000	500,000	550,000	300,000	600,000
		Collection from Cash Sales(30%)			165,000	90,000	180,000
		Collection with one month lag(60%)			300,000	330,000	180,000
		Collection with two months lag(10%)			45,000	50,000	55,000
		Rental Receipt			7,000	7,000	7,000
	A	Total Cash Receip During the Month			517,000	477,000	422,000
		Purchases		375,000	350,000	400,000	200,000
		Payment for the purchase of the month(50%)			175,000	200,000	100,000
		Payment for the purchase I month lag(50%)			187,500	175,000	200,000
		Lease Payment			15,000	15,000	15,000
		Wages and Salaries(15% of Previousmonths sales)		75,000	82,500	45,000
		Dividend				35,000
		Principal+Interest			20,000
		Taxes					50,000
	B	Total Cash disbursement during the month			472,500	507,500	410,000
	C=A-B	Net Cash Flow : Surplus/(Deficit)			44,500	(30,500)	12,000
	D	Add:Beginning Cash			110,000	154,500	124,000
	E=C+D	Ending Cash Balance			154,500	124,000	136,000
	F	Minimum Cash Balance Required			200,000	200,000	200,000
	G=F-E	Total Financing Required			45,500	76,000	64,000