CASE IN FINANCIAL MANAGEMENT

CASE 14 CASH BUDGET/ CASH

FLOW
1

TEAM MEMBERS:
1. NUSAIBAH ROSLAN
2. IDARAHAYU AYOB
3. RAYMOND LUCKY SUMARGO

BACKGROUND OF TRIAD
CAMPERS
Founder - Tim Cook
Build camping trailers
Customize and sell trailers from inventory
Terms of sale 2/10, net 90
10% of sales paid within 10 days
75% of sales paid after 90 days
12% paid within 120 days and 3% uncollectable
Triad Campers had cash flow problem due to increase
in the time dealers took to pay

INFORMATION
COGS : 62% of sales
G& A expense : 8.8%
Depreciation and interest : Constant
Tax: 38%
Purchases: 32%
Salaries: $4,200
Wages: 19.6% of sales
Direct factory: 4.9% of sales
Administration expense: increase $500
per month
Selling expenses: 7.8% of sales
Lease payment July: $19,000
Tax payment September: $19,800
Cash balance: $15,000

ANSWE
RS

Question
1

ANSWERS
Question 2
Tim firm already borrowed $57,000 on its $60,000 line
of credit from the bank by the end of June. He will need
to increase lines of credit at least 21,000. If the increase
is not granted, Tim needs to restrict his growth rates.

ANSWERS
Question 3

As the sale revenue

growing, the needs to
borrow also growing.

ANSWE
RS
Question
4

ANSWER
S
5
Question

We do not find it surprising that only 10 percent of his

customers took advantage of the discount and paid within 10
days. From the calculation below, we can see that the cost of
giving up the discount was only 9.13%, hardly beneficial to
pay early.

Important: Dealers are selling in long term basis to attract

customers

ANSWERS
9

Question 6
Difference between profit and cash flow. How profitable firm can
experience cash crunches and have a need for outside capital.
Cash Flow

Profit

Money in and out from operations,

financing and investing activities

Remains from sales revenue (net

income)

Concerned with the time at which

the movement of money takes
place

Looks at income and expenses at a

certain point in time

Indication of companys strength.

Goal is to ensure firms solvency,
generate positive cash flow and
maximize share price

Sales made beyond a breakeven

point

Record transaction when money is

actually paid or received

Based on accrual concept

transactions recorded in the period
Cash crunch company needs to
prioritize
and of
in which
they payment
occur regardless
whether
the cash
is received or not
increase collection efforts. Caused
by drop
in revenue,

overcrowded inventory, undercapitalization, allow expenses

to drive revenue

10

REFERENCE FOR
CASH FLOW &
PROFIT

11

ANSWERS
Question 7
Cash budget is important financial tool for small firm or
large firm?
Cash budget is important financial tool for small firm
like Triad Campers rather than large firm.
Larger firms tend to have steady cash flow after a long
period of business and financing institutions are more
interested with their profitability.

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SCENARIO ANALYSIS
Change in Desired Cash
Desired Cash: $ 20,000

13

SCENARIO ANALYSIS
Desired Cash: $
20,000
Proportion of sales
to avoid cash
crunch:
90%90% of
of e
the original
x pe
c

ted

sa l e
s