Income Statement Jan Feb Mar Apr May Jun Jul

Units (Sold) 1000 1500 2000 2500 3000 3500 4000

Sales 55000 82500 110000 137500 165000 192500 220000
COGS 35000 52500 70000 87500 105000 122500 140000
Gross profit 20000 30000 40000 50000 60000 70000 80000
Fixed Cost 10000 10000 10000 10000 10000 10000 10000
Net Profit 10000 20000 30000 40000 50000 60000 70000

CFS
OP.Cash 146250 111250 72500 30000 0 0 0
Operating Activity
Collection from customers 27500 41250 55000 82500 110000 137500 165000
COP VC -52500 -70000 -87500 -105000 -122500 -140000 -157500
COP FC -10000 -10000 -10000 -10000 -10000 -10000 -10000
Investing Activity 0 0 0 0
Financing Activity (Bank loan) 0 0 0 2500 22500 12500 2500

Cl.Balance 111250 72500 30000 0 0 0 0

Balance Sheet
Assets
Cash 111250 72500 30000 0 0 0 0
Accounts Receivables 96250 137500 192500 247500 302500 357500 412500
Inventory 52500 70000 87500 105000 122500 140000 157500
Total Assets 260000 280000 310000 352500 425000 497500 570000

Equities and Liabilities

Common Stock 250000 250000 250000 250000 250000 250000 250000
RE 10000 30000 60000 100000 150000 210000 280000
Bank Loan 2500 22500 12500 2500

Total Equities and Liabilties 260000 280000 310000 352500 422500 472500 532500

total bank loan 40000

Medieval Group can pay off the bank loan using the cash available after September(2,17,500)
Aug Sep
4500 5000 5500
247500 275000
157500 175000
90000 100000
10000 10000
80000 90000

0 0

192500 220000
-175000 -192500
-10000 -10000

-7500 -17500

0 0

0 0
467500 522500
175000 192500
642500 715000

250000 250000
360000 450000
-7500 -17500
p
602500 682500
Q1)
The company would need funds in the following months:
April: $2500
May: $22,500
June: $12,500
July: $2,500

The company can take short term loans from the bank to meet these shortages in fund.

The company can start repaying the short term loans patially in the following months as cash generated by operations turn
positive:
August: $7,500
September: $17,500

Q2)
Medieval Company was paying its costs currently.Based on its payment terms, it allowed customers a credit of 30 days. Furthe
more, due to lax in its follow up , the customes would pay after 2 months in place of 30 days. The company was going through
constant growth and with lax payment from customers, there were large net operating cashflows, each month which would
dent the firm's initial capital(as encountered in April). Till July, the current outflows exceeded the current inflows, and hence t
situation. From August, we see a reversal , where current inflows exceed the current outflows.

The situation could be avoided if the company maintained cash flow statements. This would allow them to intervene/ predict
their need for cash and subsequently acquire a short term bank loan.
Medieval Company could also adopt strict collection terms not only on paper but in reality and limit to the original terms of 30
days net credit.

Q3)
The Cash Flow Statement for the month of March, May and July are available in previous tab.
 nerated by operations turn

mers a credit of 30 days. Further

e company was going through
s, each month which would
e current inflows, and hence the

w them to intervene/ predict

mit to the original terms of 30