FINANCIAL MANAGEMENT CASE STUDY ASSIGNMENT -
Aisling ltd is preparing to set up business on 1 July 2018 buying and selling industrial equipment for clothing manufacturers. It has made the following forecast for the first 6 months of trading:
|
|
July €
|
August €
|
September €
|
October €
|
November €
|
December €
|
Total €
|
|
Sales
|
425,000
|
440,000
|
580,000
|
590,000
|
600,000
|
652,000
|
3,287,000
|
|
Purchases
|
200,000
|
215,000
|
252,000
|
260,000
|
350,000
|
356,000
|
1,633,000
|
(i) The expected selling price is 50€ per unit.
(ii) The cash collection pattern from sales is expected to be:
Cash Customers: 30% of sales revenue will be for immediate cash. A cash discount of 5% will be allowed.
Credit Customers: 70% of sales revenue will be from credit customers. These debtors will pay their bills 50% in the month after sales and the remainder in the second month after sales.
(iii) The cash payments pattern for purchases is expected to be:
Credit suppliers: The purchases will be paid for 50% in the month after purchase and 2% discount will be obtained. The remaining purchases will be paid 2 months after purchase
(iv) Expenses of the business will be settled as follows:
Expected Costs:
Capital Costs Wages 35 000€ per month payable as incurred
Variable overheads 10€ per unit sold payable as incurred
Fixed overheads (including depreciation) 42,000€ per month payable as incurred
Capital Costs:
Office and computer equipment will be purchased in July costing 45,000€ and will have a useful life of 5 years. To finance this purchase, a loan of 40,000€ will be obtained from the bank at 10% per annum. Interest will be paid monthly, but capital loan repayments will not commence until January 2019.
The nature of the business is such that it is expected that there will be no closing inventory at 31 December 2018. In order to create the company, investors will bring in 30,000€ on the first month of trading.
You are required to:
1) Prepare a cash budget for the 6 months July to December 2018.
2) Prepare a budgeted Income Statement for 6 months ended 31/12/2018.
3) Prepare a Statement of financial position at 31 December 2018.