BSBFIM501 Diploma of Leadership and Management

Assessment No 2 Assessment Weighting 40%
Assessment Type Assignment
Due Date Week No. 2 Room TBA
Details of Subject
Qualification BSBFIM501 Diploma of Leadership and Management
Subject Name Managing Finance
Details of Unit(s) of competency
Unit Code (s) and Names BSBFIM501A Manage Budgets and Financial Plans
Details of Student
Student Name
College Student ID

Purpose of the Assessment

Question 1: Metropolitan Furniture (10 mark)
Peter works in the accounts unit of the Metropolitan Furniture Manufacturing. He was asked to prepare a proposed budget for the forthcoming quarter. He consults with the sales manager and finds that:
Estimated sales are as follows:
February $265,000 April $290,000
March $255,000 May $250,000
June $280,000
In consultation with the production manager he estimates that the cost of goods sold is to be budgeted at 45% of the sales figure. The salaries are expected to be $65,000 per month. When sales exceed $260,000 in any one month, the sales team is entitled to an additional 5% commission on the excess sales over this figure. Other expenses are estimated to be $35,000 per month.
The owner of the organisation is concerned about the cash flow which was not thought of before. The owner is of the opinion that the collection of cash from sales is slow and this could possibly lead to cash flow problems to the organisation. As Peter has never forecasted cash flow before he sets about collecting information on this.
Peter estimates that 80% of the total sales are going to be cash sales where the bill is settled when the goods are purchased or delivered. 10% of the month’s sales settle the accounts owed in the month following sales. Others (i.e. 10% of the month’s sales) settle in the month after.
Additional information for Cash Flow Statement:
The organisation gets a month’s credit on its purchases. That is, the accounts for the purchases (COGS) made in one month is settled in the following month.
? All salaries are paid in the month as they are incurred.
? The additional commission is paid in the month after the month in which it was earned.
? Other expenses are paid in the month they were incurred.
? The bank balance at the beginning of the first month is estimated to be $40,000.

1. Show the profit and loss calculations for the April, May and June
2. Show the cash flow projection calculations for April, May and June
3. What Peter is required to advise the owner of the organisation?
4. Will the business adequate financial provision to pay tax? Why?
5. If the cash flow statement and the P & L are productive, then what are the relevant people Peter needs to communicate if he establishes a business plan?
6. If the P & L showing good profit trend and the forecasted cash flow statement returns positive results, then marketing and operational departments may tend to expand theirbudget and therefore the business may have cash shortage in future. How Peter can monitor financial performance on a continuous basis?
7. Does Peter require advising the owner about any immediate change in the financial plan? Why?
Answer (1):
Profit and Loss calculations
April May June
$ $ $
Sales
Less Cost of Goods Sold
Gross Profit
Sales Salaries
Commission
Other expenses
Total expenses
Net Profit
Answer (2):
Cash flow projections
April May June
$ $ $
Opening Cash
Plus cash in:
This month
From last month
From two months ago
Total Cash available
Lesscash out:
Salaries
Commission
other expenses
Stock
Total cash out
Closing cash balance
Answer (3):
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Question 2: Preparation of Cash Flow Statement (10 mark)
Calculate the total cash inflows and cash outflows and the net cash position at the end of December from the following information:
Use the space provided and show all line items.
XYZ Pty Ltd.
December 2012
Particulars Amount $
Cash receipts from customers 245,000
Cash paid to suppliers and employees 101,570
Interest paid 24,120
Income tax paid 25,910
Purchase of Subsidiary X, net of cash acquired 450000
Purchase of property, plant and equipment 350,100
Proceeds from sale of equipment 120,000
Interest received 22,550
Dividends received 25,654
Proceeds from issue of share capital 250,000
Proceeds from long-term borrowings 250,000
Payment of finance lease liabilities 50,000
Dividends paid 25,700
Cash and cash equivalents at beginning of period 530,750
Instruction for the students:
• Regular inflow and outflow is recorded under operating activities
• Cash inflow and outflow related to non-current assets are recorded under investment activities
• Cash inflow and outflow related to interest bearing transactions are recorded under financing activities.
• For each section add the inflows and then deduct the outflow.
Operating activities: $ Net Cash flow
$

Investment activities:
Financing activities:
Total Cash surplus/deficit
Cash and cash equivalent at the beginning of the year
Cash and cash equivalent at the end of the year
Question 3: GST and Cash Flow Statement (10 mark)
A company forecasts the following transactions during the next financial year which willaffect its
cash flow. (All ATO dues and ATO credits are expected to be settled during theyear.)
$
Cash sales, 10% GST not included
Credit sales for year, including 10% GST
Cash receipts in respect of credit sales — budget year
Cash receipts in respect of credit sales — previous year
Cash purchases, 10% GST not included
GST payable to ATO
GST input credit from ATO
Wages
Other payments, including 10% GST 90 000
186 000
150 000
11 000
80 000
10 000
20 000
110 000
44 000
Prepare a budgeted cash flow statement assuming that the opening bank balance was $30,200.
Workings:
Cash Receipts: $ $
Cash sales
GST receipts on cash sales
Credit sales – budget year
Credit sales – previous year
Total Cash receipts
Cash Payments:
Purchases
GST payments on cash purchases
Wages
Net GST payable to ATO
Other payments
Total Cash Payments:
Cash surplus/(deficit)
Opening bank balance
Closing bank balance

Question 4: Cash Flow Statement (10 mark)
Suppose, a business estimated its 3rd quarter cash collection i.e. $500,000 and during that time its cash payment for purchase is going to be $340,000, other expenses 150,000. The business will also have to pay back its previous loan of $100,000. The business estimated its cash balance at the beginning of the quarter 50,000 and it desires to maintain a cash balance of 60, 000 at the end.
Required: Calculate how much finance it needs to maintain the closing cash balance. (i.e. how much cash it needs to borrow)
Cash Receipts: $ $

Total Cash receipts
Cash Payments:
Total Cash Payments:
Cash surplus/(deficit)
Opening bank balance
Total Cash available before borrowing from lender
Money required to be borrowed to arrive at closing balance
Closing bank balance 60,000

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Answer (1):

Profit and Loss calculations
April

$

Sales 290,000
Less Cost of Goods Sold (45% of sales) 130,500
Gross Profit 159,500

Expenses
Salaries 65,000
Commission (5% on sales above $260,000) 1500
Other expenses 35,000
Total expenses 101,500

Net Profit 58,000

May

$

Sales 250,000
Less Cost of Goods Sold (45% of sales) 112,500
Gross Profit 137,500

Expenses
Salaries 65,000
Other expenses 35,000
Total expenses 100,000

Net Profit 37,500

June

$

Sales 280,000
Less Cost of Goods Sold (45% of sales) 126,000
Gross Profit 154,000

Expenses
Salaries 65,000
Commission (5% on sales above $260,000) 2000
Other expenses 35,000
Total expenses 102,000

Net Profit 52,000

Answer (2):

Cash flow projections
April

$

Opening Cash 40,000
Plus cash in:
This month 265,000
From last month (10% of March sales) 25,500
From two months ago (10% of February sales) 26,500
Total Cash available 357,000

Less cash out:
Salaries 65,000
Commission (5% on sales above $260,000) 1250
Other expenses 35,000
Stock (55% of April sales) 144,750
Total cash out 245,000

Closing cash balance 112,000

May

$

Opening Cash 112,000
Plus cash in:
This month 250,000
From last month (10% of April sales) 14,950
From two months ago (10% of March sales) 25,500
Total Cash available 402,450

Less cash out:
Salaries 65,000
Commission –
Other expenses 35,000
Stock (55% of May sales) 123,750
Total cash out 223,750

Closing cash balance 178,700

June

$

Opening Cash 178,700
Plus cash in:
This month 280,000
From last month (10% of May sales) 12,375
From two months ago (10% of April sales) 14,950
Total Cash available 486,025

Less cash out:
Salaries 65,000
Commission (5% on sales above $260,000) 3,500
Other expenses 35,000
Stock (55% of June sales) 154,000
Total cash out 257,500

Closing cash balance 228,525

Answer (3):
Peter is required to advise the owner of the organisation about the slow collection of cash from sales and how it could lead to cash flow problems for the organization. He should suggest strategies to improve cash flow, such as offering discounts for early payment, incentivizing customers to pay on time, or tightening credit policies for customers who frequently pay late.

Answer (4):
It is not possible to determine whether the business has adequate financial provision to pay tax without additional information on the amount of tax owed, the due date for payment, and the availability of funds in the cash flow projections. Peter should review the tax obligations and compare them to the cash flow projections to determine if there is sufficient cash available to pay taxes when they are due.

Answer (5):
If the cash flow statement