Chapter 5 Case

You are the Chief Financial Officer (CFO) for Zen Distributors Inc., a media broker that secure shelf space in independent bookstores for small publishing companies. As a member of the company’s executive team, you are preparing the operating budget for the fourth quarter of 2020. Your intent is to summarize the budget for team members and provide them with detailed schedules that support your overview.  

Zen’s general ledger provides you with current account data on September 30, 2020 (the end of the third quarter) of operations:

Jack Closer, Vice President of Sales, estimated that sales should increase slightly from their fourth quarter levels of the previous year. Per your request, he forwarded his monthly fourth quarter sales estimates to you, along with the current month’s actual sales and his forecast for January 2021.

You next met with Mary Balance, Zen’s Controller. Ms. Balance informed you that the company prices its products to ensure a 25% gross profit margin on sales. Zen has met that margin throughout the first three quarters of 2020, and she was confident that the firm would meet this target margin in the near term. Mary also told you that, on average, 60% of Zen’s customer pay in cash. Those customers receive a one percent discount on the invoice price.

The remaining 40% of the customers pay on account. Credit sales terms are n/2EOM. This means credit customers must pay the full invoice price by the end of the month following the month in which they purchased merchandise. Mary explained, “Our customers are pretty sophisticated, and they constantly manage their cash flows--just as we do. Consequently, if we make a credit sale in October, they will pay us by the end of November.” Finally, Mary said, “We screen our customers very carefully before extending them credit. Our customers pay what they owe us. We don’t have any bad debts, and we don’t expect any in the future.”  

Mary also provided you with third quarter monthly expense data to assist in constructing your budget. The next table presents that information:

She concluded that, “As you know, we pay our operating expenses in the month we accrue them.”

               Procurement officer Jim Washburn managed inventory so that its ending balance equaled 80% of the next month’s cost of goods sold. Washburn said, “We can construct monthly purchase budgets as follows: add desired ending inventory to cost of goods sold, which are 75% of sales, to determine required inventory for a month. Then we subtract that month’s beginning inventory to determine required purchases for the month.” Washburn also stated that the accounts payable clerk pays one-half of each month’s inventory cost in the month of acquisition, and the remaining 50% in the following month.

               Ashleigh McNamara, head of capital expenditures, informed you that Zen will make a cash purchase of $1,500 worth of hand-held scanning devices in early October. McNamara said “We will use operating cash to pay for the scanners because they are an inexpensive capital acquisition.” Per corporate policy, the firm will depreciate this equipment over thirty months on a straight-line basis. Ashleigh added, “They’ll be useless at the end of that time, so we will scrap them.”    

               In your role as CFO, you insist that Zen maintain an ending monthly cash balance of $4,000 to maintain financial flexibility. The company has an open line of credit with its banking partner to ensure that it can meet its cash balance goal. This agreement mandates a 12% annual interest rate for all short-term borrowings. Financing must take place at the beginning of the month in thousand dollar multiples. Repayments of borrowing must also occur in thousand dollar increments, and the bank only accepts interest payments when Zen repays principal.    

Required:

Compose a memorandum to Zen’s management team that highlights the key aspects of the 2020 fourth quarter operating budget. Supplement your summary with budgetary schedules and attach them to the executive summary. The budgetary flow that you select is as follows:

• Cash collections

• Inventory purchases

• Cash disbursements for purchases

• Cash disbursements for operating expenses

• Short-term financing budget (collections, disbursements, and financing)

You construct each of the above budgets on a monthly and quarterly basis.

               Finally, you conclude your budgets with projected (pro-forma) monthly and quarterly income statements and a pro-forma balance sheet on December 31. The company has a zero percent income tax rate, due to previous tax losses.  

1. "Consumers perceive digital firms as offering more value". What do you think of that?

2. What do you think about this kind of interview question:

You have a birthday cake and have exactly 3 slices to cut it into 8 equal pieces. How do you do it?

3. The interview time should be about checking in on the culture of an organization; how do you measure/observe the culture and evaluate if it is a fit for you?

Q Ltd. bought a new machinery on July 01, 2015 for $72,000. The machinery is expected to have a useful life of 8 years, after which, it will be scrapped for $3,500. On August 01, 2016, the company bought a new machinery and following costs were incurred on it: Purchase price$ 480,000 Non-refundable taxes $ 72,000 Delivery charges $ 25,000 Transporation insurance $ 6,500 Installation charges $ 3,200 Test run charges $ 800 Maintainance contract for further 3 years $ 12,000 The estimated useful life of the machinery is 13 years, and the salvage value is expected to be $18,500. During the year 2019, the company re-estimated the expected life of the machincery bought on July 01, 2015, and the number was revised to 11 years. The company bought a new machinery in the year 2020 for $63,000. The machinery was expected to produce a total of 130,000. The machinery was used to produced 23,000 units during the year 2020, 38,400 units during the year 2021, 58,200 in 2022, and 10,600 in 2023. In the year 2022, the company revised the salvage value of the machinery bought on August 01, 2016 from $18,500 to $21,300. Prepare the depreciation chart from 2015 to 2023 assuming that the company's fiscal year end is December 31.

Imagine you work for a large computer software company and you have been offered an opportunity to propose a leadership training model to your company’s CEO and executive staff. What would it look like and how would you present this model? What steps would you use to determine the leadership needs of the company? Which employees would be candidates for this leadership training opportunity and how would they be selected?

20.37) Researchers claim that women speak significantly more words per day than men. One estimate is that a woman uses about 20,000 words per day while a man uses about 7,000. To investigate such claims, one study used a special device to record the conversations of male and female university students over a four- day period. From these recordings, the daily word count of the 20 men in the study was determined. Here are their daily word counts:

What value we should remove from observation for applying t procedures?

A 90% confidence interval (±±10) for the mean number of words per day of men at this university is from  to  words.

Is there evidence at the 10% level that the mean number of words per day of men at this university differs from 9000?

Question: Historical Relationship between South African Rand, US dollar and currencies of the BRIC Countrie...

(1 bookmark)

Historical Relationship between South African Rand, US dollar and currencies of the BRIC Countries I BRICS is an acronym for the association of the economies of Brazil, Russia, India, China and South Africa and BRIC is a similar acronym excluding South Africa. Mweleco FX Pty LTD, a foreign exchange trading company based in Johannesburg, has been contracted by a hypothetical Namibian Stock Exchange (NSE) to examine the historical relationship between the Rand(as a proxy for the Namibian Dollar- N$), currencies of the BRIC countries and the US Dollar from April 9, 2006 to March 27, 2011. Issues of interest to the NSE are: • The historical volatility (risk) between the currencies of the BRIC currencies, South African Rand and the US dollar during the period; Project Historical Relationship between South African Rand, US dollar and currencies of the BRIC Countries II • The relationship between BRICS currencies. You are required to provide a brief report (Minimum 4 pages and maximum 8 pages (including tables, figures, references etc.) to the NSE covering the following:

(a). A brief introduction of the study;

(b). Brief literature review on general issues around currency volatility (risk) and returns;

(c). Relationship(s) between the South African Rand, US Dollar and the sampled currencies of BRIC countries and whether the relationship(s) can be, predictably, explored;

(d). Brief discussion of the empirical findings from the study;

(e). Conclusion and some recommendations to the NSE.

PartA： Jan 1^st, 2020: Tony Inc. buys a machine from Avengers Inc. and will make 3 equal payments of 200,000 over the next 18 months (payments on June 30, 2020; Dec 31, 2020; and June 30, 2021). The interest rate on this annuity is 14%. Record all the journal entries from Jan 1^st 2020 until the expiration of the annuity. (4 points) Assume the machine does not depreciate.

Part B: Create the balance sheet as of December 31^st, 2020 along with the income statement and cash flow statement for the time period of Jan 1^st, 2020 to Dec 31^st,2020 (6 points) (There might have a $1 rounding issue