case in financial management-case 14, triad camp
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Case 14- Triad campersTRANSCRIPT
CASE IN FINANCIAL MANAGEMENT CASE 14 Cash Budget/ cash flow Team members: 1. Nusaibah ROSLAN 2. Idarahayu ayob 3. Raymond LUCKY SUMARGO
CASE IN FINANCIAL MANAGEMENTCASE 14 Cash Budget/ cash flow
Team members:1. Nusaibah ROSLAN2. Idarahayu ayob3. Raymond LUCKY SUMARGO11Background of Triad campersFounder - Tim CookBuild camping trailersCustomize and sell trailers from inventoryTerms of sale 2/10, net 9010% of sales paid within 10 days75% of sales paid after 90 days12% paid within 120 days and 3% uncollectableTriad Campers had cash flow problem due to increase in the time dealers took to pay
2informationCOGS : 62% of salesG& A expense : 8.8% Depreciation and interest : ConstantTax: 38%Purchases: 32%Salaries: $4,200Wages: 19.6% of salesDirect factory: 4.9% of salesAdministration expense: increase $500 per monthSelling expenses: 7.8% of salesLease payment July: $19,000Tax payment September: $19,800Cash balance: $15,000
3ANSWERS
Question 14
ANSWERSQuestion 2Tim firm already borrowed $57,000 on its $60,000 line of credit from the bank by the end of June. He will need to increase lines of credit at least 21,000. If the increase is not granted, Tim needs to restrict his growth rates.5ANSWERSQuestion 3
As the sale revenue growing, the needs to borrow also growing.
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ANSWERSQuestion 4
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ANSWERS8answersQuestion 6Difference between profit and cash flow. How profitable firm can experience cash crunches and have a need for outside capital.
Cash FlowProfitMoney in and out from operations, financing and investing activitiesRemains from sales revenue (net income)Concerned with the time at which the movement of money takes placeLooks at income and expenses at a certain point in timeIndication of companys strength. Goal is to ensure firms solvency, generate positive cash flow and maximize share priceSales made beyond a breakeven pointRecord transaction when money is actually paid or receivedBased on accrual concept transactions recorded in the period in which they occur regardless of whether the cash is received or notCash crunch company needs to prioritize payment and increase collection efforts. Caused by drop in revenue, overcrowded inventory, undercapitalization, allow expenses to drive revenue9Reference for cash flow & profit10
answersQuestion 7Cash budget is important financial tool for small firm or large firm?Cash budget is important financial tool for small firm like Triad Campers rather than large firm.Larger firms tend to have steady cash flow after a long period of business and financing institutions are more interested with their profitability.11SCENARIO ANALYSISChange in Desired CashDesired Cash: $ 20,000
12SCENARIO ANALYSISDesired Cash: $ 20,000Proportion of sales to avoid cash crunch: 90% of the original
90% of expected sales13