Financial Management EIB11803

QUESTION 1

The following are several information and assumptions in preparing the cash budget for
Gemilang Company for March - May 2010. The sales forecast (in RM) is:

Month Total sales Credit

January 45,000 33,750
February 65,000 48,750
March 60,000 45,000
April 90,000 67,500
May 85,000 63,750
June 60,000 45,000

a) For credit sales, 80% of it will be collected in the next month and 20% will be collected two
month after the sale.
b) The purchase of raw material is predicted at 60% of sales and the payment will be made a
month later.
c) Office and warehouse rentals are RM4.500 per month.
d) Payments of wages are RM5.000 per month.
e) The company will pay insurance premiums of RM2.800 in the month of March.
f) The purchase of a new asset involving a cost of RM25.000 will be made in the month of
March.
g) Opening cash balance that the company of March is RM15,000.
h) The cash balance that the company intends to hold every month is RM10,000.
i) Interest rate 12% per year will be charge if the company making a loans.

Prepare a cash budget for Gemilang Company for March - May 2010. (20 marks)

QUESTION 2
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Kojima Berhad is trying to estimate its need of funds for the second quarter of year 2009.
The company's actual and forecasted sales are as follows:

Actual RM Forecasted RM
January 160,000 April 180,000
February 190,000 May 260,000
March 140,000 June 220,000
July 280,000

b) The collection of sales is as follows:

• 30% is for cash
• 70% is collected one month after sales

c) The purchases of the raw materials are 60% of sales and made one month in advance.
The payments are made in the same month in which the sales occur.

d) Rent expenses is RM3.000 per month. 6% of interest payment on RM150,000 notes

payable is to be paid in May.

f) Wages and salaries in April, May and June are estimated to be RM10,000, RM12.000 and
RM14.000 respectively.
g) Other fixed monthly expenses:
• Depeciation RM15,000
• Insurance RM 3,000

h) The company plans to pay RM10,000 in cash for a new cutting machine in June. This new
machine will depreciate RM500 per month.

i) The cost of renovation of RM50,000 will be paid equally in May and June. A quarterly
dividend of RM5.000 will be received in June.

k) Kojima Berhad's ending cash balance for March is RM30.000 and a minimum balance the
firm wishes to have is RM50.000 per month and the amount will be increased to RM100,000
starting from June.

You are required to prepare a cash budget for Kojima Berhad for the second quarter of year
2009. (20 marks)

QUESTION 3
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The Ahmad Furniture Sdn Bhd (AF) projected sales for the first 8 months of 2008 are as
follows:

January RM300.000
February RM450.000
March RM540.000
April RM960.000
May RM1,200,000
June RM1,000,000
July RM900.000
August RM700.000

20% of AF Sdn. Bhd. sales are for cash, another 40% is collected in the month
followingsales, and 40% is collected in the second month following sales. November and
December sales for 2007 were RM800.000 and RM650.000 respectively.

AF Sdn. Bhd. purchases of raw materials equals to 60% of sales and is made two months in
advance of sales. The supplier is paid one month after the purchase Furthermore, AF Sdn.
Bhd. pays RM42,000 per month for rent, and RM90.000 per month forother expenditures.

Tax deposits of RM85.000 are made each quarter, beginning in March.

The company's cash balance on December 31, 2007 was RM80.000 and a minimum balance
of RM50.000 must be maintained at all times. Any short term financing needed to maintain
the minimum cash balance should be paid off in the month following the month of financing
with an annual interest rate of 12% per annum.

Prepare a cash budget for AF Sdn. Bhd. for the first four (4) months of 2008. (20 marks)

QUESTION 4

The projected sales of Terus Maju Holdings for the first and second quarter of 2009 are as
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follows:

Month Total sales (RM)

January 2 500 000
February 2 600 000
March 2 650 000
April 3 630 000
May 3 850 000
June 3 780 000
July 3 900 000

i. The company makes 20% cash sale, 50% is collected in the month following sales, and
30% is collected in the second month following sales.

ii. Purchases are 60% of sales and are made one month before the sales occur. Payment is
made equally in the two months after purchases.

iii. The company pays RM35 000 each month for wages and RM20 000 each month for rent
and other administrative expenses.

iv. Selling expenses are RM40 000 per month. Tax repayment of RM30 000 are made at the
beginning of each quarter.

vi. A machine costing RM70 000 will be bought on May 2009, and the monthly depreciation
is RM200.

vii. Interest on term loan of RM15 000 is payable at the beginning of every quarter.

viii. Beginning balance is RM80 000 and a minimum of RM20 000 must be maintained at all
times.

Prepare a cash budget for Terus Maju Holdings for the second quarter of 2009. (20 marks)

QUESTIONS 5
 Financial Management EIB11803

Bagus Industri Bhd. is preparing a cash budget for the second quarter of 2008. The following
are its sales figures:

ACTUAL SALES (RM) YEAR 2008 FORECASTED SALES (RM) YEAR 2008

January 160,000 April 225,000

February 140,000 May 250,000
March 190,000 June 210,000
July 220,000

a) The company collects 30 percent of its sales in the month of the sale, 30 percent in the
month following the sale, and the remaining 40 percent two months following the sale.

b) Purchases of raw material are 75 percent of the month sales and are made one month in
advance of the expected sale.

c) Payments for purchases are made in the month of sales.

d) A new machine will be installed and paid in May. The price is RM30.000
.
e) Insurance payments of RM10,000 are made at the end of each quarter.

f) Fixed monthly expenses are:

Rent - RM12,000
Utilities - RM20.000
Depreciation - RM 7,500

g) Tax payments of RM26.500 are made at the beginning of each quarter.

h) Dividends of RM30.000 will be received in May.

i) Ending cash balance for March is RM38.500.Minimum cash balance of RM25.000 must be
maintained at all times.

From the information provided above, prepare a cash budget for the second quarter.
(20 marks)

QUESTION 6

The balance sheet for APPRENTICE CORP is as follows:

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APPRENTICE CORP
Balance Sheet as at 30th June 2006 (RM'000)
Cash 38,000 Accounts payable 53,000
Marketable securities 31,000 Notes payable 30,000
Accounts receivables 50,000 Taxes payable 15,000
Inventories 77,500 Long term debt 15,500
Net plant &equipment115,500 Preferred stock 70,000
Common stock 100,000
Retained earnings 28,500

Total assets 312,000 Total claims 312,000

Currently, the company's sales are at RM500 million a year and the company has not
reached its maximum capacity limit. During 2006, the company earned RM20 million as net
profit and paid-out RM10 million in dividend also recorded the net profit margin of 5 percent.
How much additional financing will be needed if sales expand to RM720 million during 2007?
(Construct a pro forma balance sheet). (14 marks)

QUESTION 7

Given the following information for Mutiara Height, you are required to prepare a cash
budget covering the second quarter of 2010.The Mutiara Height's projected sales for the first
eight months are as follows:
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January RM 90,000 April RM240.000 July RM225,000

February RM120,000 May RM300.000 August RM150,000
March RM135.000 June RM270.000

10 percent of sales is for cash, another 60 percent is collected in the following month and 30
percent is collected in the second month following sales.

b) Mutiara purchases raw materials one month before its sales. Amount of raw materials
needed is 60 percent of its total sales. The supplier is fully paid one month after the month of
purchase.

c) The company pays RM10,000 per month for renting purposes, RM25.000 for salaries and
wages and RM20.000 each month for other expenditures. Depreciation is fixed at RM5.000
per month.

d) In 2010, the company will make quarterly payment of interest and total interest for the year
is RM64.000. Payment will be made at the beginning of each quarter.

e) The firm will receive interest from its investment totalling RM66.000 in May.

f) The firm's cash balance on 31st March 2010, is RM49.000; a minimum balance of
RM15,000 is to be maintained at all times. (20 marks)

QUESTION 8

Kojima Berhad is trying to estimate its need of funds for the second quarter of year 2009.
The company's actual and forecasted sales are as follows:

Actual RM Forecasted RM
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January 160,000 April 180,000

February 190,000 May 260,000
March 140,000 June 220,000
July 280,000

b) The collection of sales is as follows:

• 30% is for cash • 70% is collected one month after sales

c) The purchases of the raw materials are 60% of sales and made one month in advance.
The payments are made in the same month in which the sales occur.Rent expenses is
RM3.000 per month. 6% of interest payment on RM150,000 notes payable is to be paid in
May.

d) Wages and salaries in April, May and June are estimated to be RM10,000, RM12.000 and
RM14.000 respectively.

g) Other fixed monthly expenses:• Depeciation RM15,000 • Insurance RM 3,000

h) The company plans to pay RM10,000 in cash for a new cutting machine in June. This new
machine will depreciate RM500 per month. The cost of renovation of RM50,000 will be paid
equally in May and June. A quarterly dividend of RM5.000 will be received in June.

i) Kojima Berhad's ending cash balance for March is RM30.000 and a minimum balance the
firm wishes to have is RM50.000 per month and the amount will be increased to RM100,000
starting from June.

You are required to prepare a cash budget for Kojima Berhad for the second quarter of year
2009. (20 marks)

QUESTION 9

The Ahmad Furniture Sdn Bhd (AF) projected sales for the first 8 months of 2008 are as
follows:

January RM300,000 May RM1,200,000

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February RM450,000 June RM1,000,000

March RM540,000 July RM900,000
April RM960,000 August RM700,000

20% of AF Sdn. Bhd. sales are for cash, another 40% is collected in the month
followingsales, and 40% is collected in the second month following sales. November and
December sales for 2007 were RM800, 00 and RM650,000 respectively.

AF Sdn. Bhd. purchases of raw materials equals to 60% of sales and is made two months in
advance of sales. The supplier is paid one month after the purchase Furthermore, AF Sdn.
Bhd. pays RM42,000 per month for rent, and RM90,000 per month forother expenditures.

Tax deposits of RM85,000 are made each quarter, beginning in March.

The company's cash balance on December 31, 2007 was RM80,000 and a minimum balance
of RM50,000 must be maintained at all times. Any short term financing needed to maintain
the minimum cash balance should be paid off in the month following the month of financing
with an annual interest rate of 12% per annum.

Prepare a cash budget for AF Sdn. Bhd. for the first four (4) months of 2008. (20 marks)

QUESTION 10

The projected sales of Terus Maju Holdings for the first and second quarter of 2009 are as
follows:

Month Total sales (RM)

January 2,500,000
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February 2,600,000
March 2,650,000
April 3,630,000
May 3,850,000
June 3,780,000
July 3,900,000

i. The company makes 20% cash sale, 50% is collected in the month following sales, and
30% is collected in the second month following sales.

ii. Purchases are 60% of sales and are made one month before the sales occur. Payment is
made equally in the two months after purchases.

iii. The company pays RM35,000 each month for wages and RM20,000 each month for rent
and other administrative expenses. Selling expenses are RM40,000 per month. Tax
repayment of RM30,000 are made at the beginning of each quarter.

iv. A machine costing RM70,000 will be bought on May 2009, and the monthly depreciation
is RM200. Interest on term loan of RM15,000 is payable at the beginning of every quarter.

vi. Beginning balance is RM80,000 and a minimum of RM20,000 must be maintained at all
times.

Prepare a cash budget for Terus Maju Holdings for the second quarter of 2009. (20 marks)

QUESTIONS 11

Bagus Industri Bhd. is preparing a cash budget for the second quarter of 2008. The following
are its sales figures:

ACTUAL SALES (RM) YEAR 2008 FORECASTED SALES (RM) YEAR 2008

January 160,000 April 225,000

 Financial Management EIB11803

February 140,000 May 250,000

March 190,000 June 210,000
July 220,000

a) The company collects 30 percent of its sales in the month of the sale, 30 percent in the
month following the sale, and the remaining 40 percent two months following the sale.

b) Purchases of raw material are 75 percent of the month sales and are made one month in
advance of the expected sale. Payments for purchases are made in the month of sales.

c) A new machine will be installed and paid in May. The price is RM30.000. Insurance
payments of RM10,000 are made at the end of each quarter. Fixed monthly expenses are:
Rent - RM12,000, Utilities - RM20,000, Depreciation - RM 7,500

d) Tax payments of RM26.500 are made at the beginning of each quarter. Dividends of
RM30.000 will be received in May. Ending cash balance for March is RM38.500.Minimum
cash balance of RM25.000 must be maintained at all times.

From the information provided above, prepare a cash budget for the second quarter.
(20 marks)

QUESTION 12

Prepare a summarize proforma income statement for Shamsuri Sdn Bhd for the
periodending 31 December 2006 based on the following information:

i) Actual sales 2005 RM1 million

ii) Projected sales 2006 Increase by 20% of 2005 actual sales
iii) Gross profit margin 40%
iv) Operating profit (EBIT) margin 25%
v) Time interest earned 6 times
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vi) Tax rate 30%

vii) Dividend pay out ratio 0.40

(14 marks)