Question

THIS IS ALL THE INFORMATION GIVEN TO DETERMINE THE SOLUTIONS:

The following are two years of income statements and balance sheets for the Munich Exports Corporation.

MUNICH EXPORTS CORPORATION
BALANCE SHEET	2009	2010
Cash	$   50,000	$   50,000
Accounts Receivable	200,000	300,000
Inventories	450,000	570,000
Total Current Assets	700,000	920,000
Fixed Assets, net	300,000	380,000
Total Assets	1,000,000	1,300,000
Accounts Payable	130,000	180,000
Accruals	50,000	70,000
Bank Loan	90,000	90,000
Total Current Liabilities	270,000	340,000
Long-Term Debt	400,000	550,000
Common Stock ($0.05 par)	50,000	50,000
Additional Paid-In-Capital	200,000	200,000
Retained Earnings	80,000	160,000
Total Liabilities and Equity	1,000,000	1,300,000
Income Statement
Net Sales	1,300,000	1,600,000
Cost of Goods Sold	780,000	960,000
Gross Profit	520,000	640,000
Marketing	130,000	160,000
General and Administrative	150,000	150,000
Depreciation	40,000	55,000
EBIT	200,000	275,000
Interest	45,000	55,000
Earnings Before Taxes	155,000	220,000
Income Taxes (40% Rate)	62,000	88,000
Net Income	93,000	132,000

NEED THE SOULTIONS FOR:

a. Calculate the cash build, cash burn, and net cash burn or build for Munich Exports in 2010

b. Assume that 2011 will be a repeat of 2010. If your answer in Part A resulted in a net cash burn position, calculate the net cash burn monthly rate and indicate the number of months remaining “until out of cash.” If you answer in Part A resulted in a net cash build position, calculate the net cash build monthly rate and indicate the expected cash balance at the end of 2011.

Answer 1

cash build	2009	2010			2011
sales		1600000	1600000		1600000
Increase in Recv	200000	300000	-100000		0
Net Cash Build			1500000		1600000
Cash Burn
Cost of Goods Sold		960000	960000		960000
Marketing		160000	160000		160000
General and Administrative		150000	150000		150000
Interest		55000	55000		55000
Income Taxes (40% Rate)		88000	88000		88000
cash burn from income statement			1413000		1413000
Increase in Inventory	450000	570000	120000
Accounts Payable	130000	180000	-50000
Accruals	50000	70000	-20000
Fixed Assets, net	300000	380000	80000
depriciation		55000	55000
Total Cash Burn			1598000		1413000
Net Cash Burn			-98000		187000
Monthly Rate			-      8,166.67
Months to Out of cash			50000/8166.67
			6.12 Months
if 2011 assumed to be same performance and assuming same balance sheet then
There will be increase in cash by 187000 which can be derived by simply as follows
	2011
Net profit	132000
Add Depriciation	55000	Assuming Same
Net Cash will be added	187000
Opening Balance of Cash	50000
Closing Balance	237000