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    Rohan Singh
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    The document contains a cash budget analysis for a company with the following key details: - The company has a 20% gross margin and inventory turnover of 44 days - The cash conversion cycle is -6.86 days - A proposed marketing strategy would increase annual sales by $1,011,000 but require $100,000 in marketing expenses, resulting in a negative net cash flow of $20,618.08 in the first year but having a positive NPV of $568,997.30 over multiple years.

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    The document contains a cash budget analysis for a company with the following key details: - The company has a 20% gross margin and inventory turnover of 44 days - The cash conversion cycle is -6.86 days - A proposed marketing strategy would increase annual sales by $1,011,000 but require $100,000 in marketing expenses, resulting in a negative net cash flow of $20,618.08 in the first year but having a positive NPV of $568,997.30 over multiple years.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    4 views3 pages

    Cash Budget

    Uploaded by

    Rohan Singh
    The document contains a cash budget analysis for a company with the following key details: - The company has a 20% gross margin and inventory turnover of 44 days - The cash conversion cycle is -6.86 days - A proposed marketing strategy would increase annual sales by $1,011,000 but require $100,000 in marketing expenses, resulting in a negative net cash flow of $20,618.08 in the first year but having a positive NPV of $568,997.30 over multiple years.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 3

    Cash Budget

    Gross Margin 20%


    Sales In Inventory 44.00
    Net Terms 30.00
    Total No. Days 365
    Tax Rate 25%
    Cost of Capital(Discount Rate) 13%
    Inventory Increase 4%
    Sales(as well as Payables and Recievabl 3%

    Part 1

    Cash Conversion Cycle


    Time
    1
    Sales $ 33,700,000.00
    COGS $ 26,960,000.00
    Inventory $ 3,249,972.60
    Payables $ 4,200,000.00
    Recievables $ 553,972.60
    Average Age of Inventory $ 44
    Average age of payables 56.8620178041543
    Average Age of Recievables 6.00

    Cash Conversion Cycle $ (6.86)

    Part 2

    Value with Marketing Strategy

    Incremental Cash Flows


    Cash Inflow
    Incremental Sales $ 1,011,000.00
    Incremental Accounts Recievable $ 16,619.18
    Incremental Inventory $ 129,998.90

    Cash Outflow
    Incremental Accounts Payable $ 126,000.00
    Marketing Expense $ 100,000.00
    Net Cash Flow $ (20,618.08)

    NPV of project $ 568,997.30


    Cash Budget
    Gross Margin 20%
    Sales In Inventory 44.00
    Net Terms 30.00
    Total No. Days 365
    Tax Rate 25%
    Cost of Capital(Discount Rate) 13%
    Inventory Increase 4%
    Sales(as well as Payables and Recievabl 3%

    Part 1

    Cash Conversion Cycle


    Time
    1
    Sales $ 33,700,000.00
    COGS $ 26,960,000.00
    Inventory $ 3,249,972.60
    Payables $ 4,200,000.00
    Average Age of Inventory $ 44
    Average age of payables 56.8620178041543
    Average Age of Recievables 6.00

    Cash Conversion Cycle $ (6.86)

    Part 2

    Value With Marketing Strategy


    Time
    1 2
    Sales $ 33,700,000.00 $ 34,711,000.00
    COGS $ 26,960,000.00 $ 27,768,800.00
    Gross Profit $ 6,740,000.00 $ 6,942,200.00
    Inventory $ 3,249,972.60 $ 3,379,971.51
    Recivables $ 6,740,000.00 $ 6,942,200.00
    Payables $ 4,200,000.00 $ 4,326,000.00
    Marketing Expense $ - $ 100,000.00
    Net Working Capital $ 5,789,972.60 $ 5,996,171.51
    Post Tax Profit $ 5,055,000.00 $ 5,206,650.00
    Cash Flow $ 10,844,972.60 $ 11,102,821.51
    NPV $ 9,597,320.89 $ 9,825,505.76
    NPV (Increase or Decrease) $ 228,184.87

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