Barloworld Plc has the following plans for the next few months. (i) Sales revenue: Month September...

 

  

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Barloworld Plc has the following plans for the next few months. (i) Sales revenue: Month September October November December January February March $ 60,000 60.000 70,000 90,000 120,000 140,000 160,000 All sales will be made on credit. Half of the trade receivables are expected to be paid within the month of sale and to claim a 2 percent cash discount. The remainder are expected to be paid in the following month. (ii) Raw materials purchases: Month September October November December January February March Month September October Barloworld Plc plans to pay its trade payables (in full) in the month following that of the purchase. (iii) Wages and salaries: November December January February March $ 20,000 40.000 40,000 30,000 40,000 40,000 20,000 (v) (vi) 12,000 15,000 17,000 13,000 15,000 12,000 12,000 All employees are paid in full in the month in which the wage or salary is earned. (iv) Rent of $10,000 each quarter is payable in March, June, September and December. Other cash overheads of $2,000 per month are payable. Three new plants due for delivery in August, September and October will be paid for in November, December and March at a cost of $25.000, $15.000, and $155,000, respectively. Required: (i) Prepare a cash budget for the months of October to March (inclusive), showing all monthly cash surpluses (deficits) and cumulative cash balances. (ii) Discuss the main costs of holding insufficient cash by a business. [20 marks] Barloworld Plc has the following plans for the next few months. (i) Sales revenue: Month September October November December January February March $ 60,000 60.000 70,000 90,000 120,000 140,000 160,000 All sales will be made on credit. Half of the trade receivables are expected to be paid within the month of sale and to claim a 2 percent cash discount. The remainder are expected to be paid in the following month. (ii) Raw materials purchases: Month September October November December January February March Month September October Barloworld Plc plans to pay its trade payables (in full) in the month following that of the purchase. (iii) Wages and salaries: November December January February March $ 20,000 40.000 40,000 30,000 40,000 40,000 20,000 (v) (vi) 12,000 15,000 17,000 13,000 15,000 12,000 12,000 All employees are paid in full in the month in which the wage or salary is earned. (iv) Rent of $10,000 each quarter is payable in March, June, September and December. Other cash overheads of $2,000 per month are payable. Three new plants due for delivery in August, September and October will be paid for in November, December and March at a cost of $25.000, $15.000, and $155,000, respectively. Required: (i) Prepare a cash budget for the months of October to March (inclusive), showing all monthly cash surpluses (deficits) and cumulative cash balances. (ii) Discuss the main costs of holding insufficient cash by a business. [20 marks]

Answer rating: 100% (QA)

To prepare the cash budget we need to determine the cash inflows and outflows for each month from October to March Lets calculate the cash budget step by step i Cash budget for the months of October t... View the full answer