Sen’s Sensibility: Managing the Cash Flow
Sen’s Sensibility: Managing the Cash Flow
Ronal Sen was looking at the bank statement for the last quarter. He thought about the effort that he underwent to make those payments referred as withdrawals in the bank statement. He recollected the occasions in which he had to request the vendor to delay the deposit of the cheque given by him as he had insufficient balance in the bank. The company he had founded had outgrown the informal processes that he used to control it. He was interested in getting the handle on the funds that he would require in the next quarter. In the last year he had suffered a lot on account of bad planning of fund requirement. In several instances he had to borrow the funds at the last minute at exorbitant rates of interest from the finance companies. He had instructed his accountant to prepare the fund requirement for a period of next 3 months. The accountant has made the following estimation:
The sales in the last 4 months are as given below:
Based on the feedback received from the sales executive he has estimated the next few months sales to be as follows:
He has further gathered the following additional information:
Cash sales are 50% of the total sales. The remaining sales are collected equally during the following two months. Ronal Sen has agreed to sell at 2/10 net 40.
Cost of goods manufactured is 80% of sales. 80% of this cost is paid after one month and the balance is paid after two months of the cost incurrence.
Fixed selling expenses are Rs.12,000 per month. Variable selling expenses are 12% of sales each month.
Half-yearly interest on 12%, Rs.4,50,000 debentures is paid during July.
Rs.60,000 are expected to be invested in fixed assets during June
An advance tax of Rs.15,000 will be paid in July
The company would maintain a minimum cash balance of Rs. 30,000. The company’s cash balance as on 30th April is Rs.30,000.
Help the accountant in estimating the fund requirement in the next 3
Ronal Sen was looking at the bank statement for the last quarter. He thought about the effort that he underwent to make those payments referred as withdrawals in the bank statement. He recollected the occasions in which he had to request the vendor to delay the deposit of the cheque given by him as he had insufficient balance in the bank. The company he had founded had outgrown the informal processes that he used to control it. He was interested in getting the handle on the funds that he would require in the next quarter. In the last year he had suffered a lot on account of bad planning of fund requirement. In several instances he had to borrow the funds at the last minute at exorbitant rates of interest from the finance companies. He had instructed his accountant to prepare the fund requirement for a period of next 3 months. The accountant has made the following estimation:
The sales in the last 4 months are as given below:
Based on the feedback received from the sales executive he has estimated the next few months sales to be as follows:
He has further gathered the following additional information:
Cash sales are 50% of the total sales. The remaining sales are collected equally during the following two months. Ronal Sen has agreed to sell at 2/10 net 40.
Cost of goods manufactured is 80% of sales. 80% of this cost is paid after one month and the balance is paid after two months of the cost incurrence.
Fixed selling expenses are Rs.12,000 per month. Variable selling expenses are 12% of sales each month.
Half-yearly interest on 12%, Rs.4,50,000 debentures is paid during July.
Rs.60,000 are expected to be invested in fixed assets during June
An advance tax of Rs.15,000 will be paid in July
The company would maintain a minimum cash balance of Rs. 30,000. The company’s cash balance as on 30th April is Rs.30,000.
Help the accountant in estimating the fund requirement in the next 3