Bluepanda Inc. sells electronics parts, which finds application in various equipment used mainly in the construction industry.

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Question:

Bluepanda Inc. sells electronics parts, which finds application in various equipment used mainly in the construction industry. The company has faced some issues in managing its working capital and has lost some key suppliers in the recent past due to mismanagement of cash and delay in vendor payments. Bluepanda has hired you as a financial consultant to look into this matter and provide a comprehensive perspective. The management also desired to maintain a cash balance of more than $15,000 each month as financial prudence. After considering all the information provided to you, you decided that having a cash budget would be the first step to understanding the shortfall/surplus of cash and will aid in working capital management. You arranged a meeting with the marketing team and gathered the following information: Sales Forecast Month- year Sales Nov. 2022 $50,000 Dec 2022 $60,000 Jan 2023 $60,000 Feb 2023 $70,000 March 2023 $75,000 April 2023 $80,000 The accounts management team provided the following information: 80% of revenue is on a cash basis. 20% is collected after 30 days.

The cost of sales, which is 50% of revenue, is incurred in the month in which the sales are made. These goods are paid for 30 (1 month) days after the purchases are made. Monthly selling and administrative expenses are as follows: Wages $12,000 Financing Cost $2,500 Rental Cost $800 Depreciation $3,000 Communication and Promotion expense $1,000 Provision for future losses $2,000 Other budgeted expenses are as follows: Taxes: $10,000 in February, $10,000 in April, and $10,000 in September Purchase of assets: $3,000 in January, $12,000 in February, $20,000 in March, and $3,000 in April Cash balance on January 1, 2023, is $3,000 Use the above information to complete the following tasks:

Prepare a cash budget for the months of January 2022, February 2022, March 2022 and April 2022. Based on the cash budget, provide recommendation to the management of Bluepanda on cash management and any suggestions to improve cash management. Provide comments on their ability to maintain the desired cash balance of $15,000 each month.