CASE 1:

January February March

Credit sales € 380.000,00 € 396.000,00 € 438.000,00
Credit purchases € 147.000 € 175.500 € 200.500
Cash disbursements
Wages, taxes, and expenses € 39.750 € 48.210 € 50.300
Interest € 11.400 € 11.400 € 11.400
Equipment purchases € 83.000 € 91.000 € -

• The company predicts that 5 percent of its credit sales will never be collected, 35 percent of its
sales will be collected in the month of the sale, and the remaining 60 percent will be collected in
the following month.

• Credit purchases will be paid in the month following the purchase.

• In December 2019, credit sales were €210,000 and credit purchases were €156,000.

• Cash balance at 1 January 2020 is €280,000.

January February March

Beginning cash balance
Cash receipts
Cash collections from credit sales € 259.000,00 € 366.600,00 € 390.900,00
Total cash available € 259.000,00 € 366.600,00 € 390.900,00
Cash disbursements:
Payments for credit purchases € 156.000,00 € 147.000 € 175.500
Wages, taxes, and expenses € 39.750 € 48.210 € 50.300
Interest € 11.400 € 11.400 € 11.400
Equipment purchases € 83.000 € 91.000 € -
Total cash disbursements € 290.150,00 € 297.610,00 € 237.200,00
Ending cash balance € 31.150,00 € 68.990,00 € 153.700,00

The role of cash budget, in this case, is for having liquidity and the ability to solve in the market.
CASE 2

2019 Income Statement

Sales € 7.900,00
Costs € 5.500,00
Taxable income € 2.400,00
Taxes (25%) € 600,00
Net income € 1.800,00
Dividends € 720,00
Retained earnings € 200,00
Profit € 2.720,00

PROFORMA INCOME STATEMENT

2019 Income Statement 2020

Sales € 7.900,00 € 8.600,00
Costs € 5.500,00 € 5.900,00
Taxable income € 2.400,00 € 2.700,00
Taxes (25%) € 600,00 € 675,00
Net income € 1.800,00 € 2.025,00
Dividends € 720,00 € 750,00
Retained earnings € 200,00 € 200,00
Profit € 2.720,00 € 2.975,00

Balance Sheet as at 31 December 2019

Current assets € 3.900,00 Current liabilities € 2.100,00
Fixed assets € 8.600,00 Long-term debt € 3.700,00
Total assets € 12.500,00 Equity € 6.700,00
Total liabilities & equity € 12.500,00

PROFORMA BALANCE SHEET

Balance Sheet as at 31 December 2019

Current assets € 3.900,00 Current liabilities € 2.100,00
Fixed assets € 8.600,00 Long-term debt € 3.700,00
Total assets € 12.500,00 Equity € 6.700,00
Total liabilities & equity € 12.500,00

Balance Sheet as at 31 December 2020

Current assets € 5.200,00 Current liabilities € 2.800,00
Fixed assets € 10.400,00 Long-term debt € 4.700,00
Total assets € 15.600,00 Equity € 8.100,00
Total liabilities & equity € 15.600,00
EXTERNAL FINANCING NEEDED OF 15% GROWTH IN SALES:

EFN ( 15 % )=15600−13565,2174−(200+85)

EFN ( 15 % )=15600−13565,2174−(200+85)

EFN ( 15 % )=€ 1919,7826

The financial planning is used to make a forecast of how are the expected incomes assets,
liabilities and equity are going to be. Besides, it shows in a better way the profits of an
organization.

CASE 3

Annual sales € 45.000,00

Annual cost of goods sold € 31.500,00
Average Inventory € 4.000,00
Average Accounts receivable € 2.000,00
Average Accounts payable € 2.400,00
Benchmark Cash Cycle (industry average) 52 days

Inventory Period 46,35

Receivables Period 16,22
Payables Period 27,81
Operating cycle 16,349
Cash cycle 34,76 ≈ 35

The cash cycle compare to its Cash Cycle competitors (According to the industry average) is really
good, because this cycle is 17 days ahead. This means, that the time that Dew Corporation takes to
convert all the investments in inventory and other resources into cash flows from sales is really
high in comparison to its competitors.

In companies, cash generation is a very important issue since it allows them to operate
continuously, fulfill their obligations and invest for the growth of the company. In general, the
financial statements generated by accounting information, the income statement and the balance
sheet are analyzed monthly in organizations; However, it is important to remember that the
profits presented by the first of these reports are not money with which you can meet obligations
with suppliers and creditors, nor are assets or shares, which really allows the company operates
correctly and continues to operate is cash.
These kinds of firms manage their cash in different ways through a system of collection and
disbursement techniques used. Some of these techniques will be explained right below:

Decentralized Collection Centers: This technique implies that clients are guided to send their
installments to the company's central command; this implies clients mail their installments to a
close by assortment focus, which is deliberately situated to limit mail delay.

Concentration Banks: This is the use of decentralized assortment places and neighborhood banks
to gather client installments. An exchange off exists between the quantity of assortment focuses
and the potential reserve funds figured it out. The more assortment places utilized, the less time is
required to change over clients' looks into gathered adjusts. In any case, these investment funds
from quicker assortments are counterbalanced by the immediate charges included, the open door
expenses of the repaying adjusts the firm should keep up at every neighborhood bank, or both.

Lockboxes: A lockbox is a mail station box kept up by a nearby bank to get a company's
settlements. Customers send installments to this mail station box, which is generally close to two
or three hundred miles away. The bank purges the crate a few times each working day, stores the
installments in the company's record, places the looks into the clearing framework, and sends the
firm a rundown of the installments got each day.

CASE 4

a)

credit 365
Nominal annual % cost of nonfree trade credit= x
100−credit Days paid after purchase−Dayos of discount pe

4 365
Nominal annual % cost of nonfree trade credit= x
100−4 120−30

4 365
Nominal annual % cost of nonfree trade credit= x
96 9 0

1460 73
Nominal annual % cost of nonfree trade credit= =
8640 432

Nominal annual % cost of nonfree trade credit=0,1689(16,9 %)

b)

r n
EFFECTIVE ANNUAL PERCENTAGE COST =(1+ ) −1
m

Where:
r= annual nominal rate of interest
m= number of compounding periods in a year
n= number of compounding periods the rate is required for
This is:

365
2 25−10
EFFECTIVE ANNUAL PERCENTAGE COST =(1+ ) −1
100−2

2 365
EFFECTIVE ANNUAL PERCENTAGE COST =(1+ ) 1 5 −1
98

EFFECTIVE ANNUAL PERCENTAGE COST =(1+ 0,0204)24,33 −1

EFFECTIVE ANNUAL PERCENTAGE COST =(1 , 0204)24,33−1

EFFECTIVE ANNUAL PERCENTAGE COST =0,6345(63,45 % )

c)

( 2 )∗( € 319,600 )∗( 52 )∗( € 43 )

O ptimal initial cash balance (C )=

√ 3,26
100

€ 1,429,251,200
O ptimal initial cash balance (C )=
√ 0,0326

O ptimal initial cash balance (C )= √ € 43 , 842,06 1 ,349.69

Optimal initial cash balance ( C ) =€ 209,384.96 ≈ € 209,385

d)

Check of $41,627 to pay its suppliers. Usual clearing time for the check is 3.2 days.
The company is receives $59,948. This check clears the bank in 1.5 days.
Disbursement float= ?
Collection float= ?
Net float= ?

Disbursement float =$ 41,627∗3,2

Disbursement float =$ 113,206.4

Collection float =$ 59 , 948∗1 ,5

Collection float =$ 89,922

Ne t float=Dibursment float −Collection float

Ne t float=$ 113,206.5−89,922

Net flo at=$ 43,284.4