Electronix Poland Ltd.
The treasurer of Electronix Poland Sp Ltd, a wholesale distributor of electronics supplies, wants to estimate his company’s cash balances for the first three months of 2009. Using the information below, construct a monthly cash budget for Electronix for January through March 2009.Does it appear from your results that the treasurer should be concerned about investing excess cash or looking for a bank loan?
| Period | 2008 | 2009 |
|---|---|---|
| October | November | |
| Sales | 240 | 280 |
| Purchases | 340 | 360 |
| Taxes | - | - |
Note! (1) Sales is 20% for cash, the rest on 30-days credit terms, Purchases all on 60-day credit terms.
| Wages monthly | 120 |
|---|---|
| Principal payment due on debt in March | 140 |
| Interest due in March | 60 |
| Dividend payable on March | 200 |
| Addition to accumulated depreciation in March | 20 |
| Cash balance 01.01.2009 r. | 200 |
| Minimum desired cash balance | 100 |
Continuing problem 1, Electronix annual income statement and balance sheet for 31.12.2008, follow. Additional information about the company’s accounting methods and the treasurer’s expectations for the first quarter of 2009 appear in the footnotes.
| PLN thousands | 31.12.2008 | 31.03.2009 | First iteration |
|---|---|---|---|
| Profit and Loss Statement | |||
| Net sales | 4000 | ||
| Cost of good sold | 2600 | ||
| Gross profits | 1400 | ||
| Selling and administrative expenses | 1080 | ||
| Interests expense | 60 | ||
| Depreciation | 60 | ||
| Net profit before tax | 200 | ||
| Tax (19%) | 38 | ||
| Net income | 162 | ||
| Dividends | 0 | ||
| Retained earnings | 0 |
Note! (1) Cost of goods sold consists entirely of purchased items, and the projected gross profit margin in first quarter 2009 equals 50%. (2) Selling and administrative expenses consist entirely on wages (3) Depreciation is at the rate of 20 thousands per quarter.
| Balance sheet | 31.12.2008 | 31.03.2009 | First iteration |
|---|---|---|---|
| Gross fixed assets | 600 | ||
| Accumulated depreciation | 100 | ||
| Net fixed assets | 500 | ||
| Inventory | 1200 | ||
| Accounts receivable | 640 | ||
| Cash | 200 | ||
| Total current assets | 2040 | ||
| Total assets | 2540 | ||
| Equity | 502 | ||
| Long-term debt | 660 | ||
| Taxes payable | 38 | ||
| Current portion of long-term debt | 140 | ||
| Miscellaneous accruals | 40 | ||
| Accounts payable | 1160 | ||
| Bank loan | 0 | ||
| Current liabilities | 1378 | ||
| Total liabilities and equity | 2540 |
Note! (1) 140 due March 2009. No payments for remainder of year (2) Miscellaneous accruals are not expected to change in the first quarter.
Does the March 31, 2009, estimated external financing equal your cash surplus (deficit) for this date from your cash budget in problem 1. Should it?
Do your pro forma forecasts tell you more than your cash budget does about Electronix’s financial prospects?
What do your pro forma profit and loss statement and balance sheet tell you about Electronix’s need for external financing on February 28, 2009?
Based on your answers to problem 2, construct a first-quarter 2009 cash flow forecast for Electronix.
| Cash Flow statement | 31.03.2009 |
|---|---|
| I. cash flow from operating activity | |
| 1. net income | |
| 2. corrections | |
| depreciation | |
| change in inventory | |
| change in receivables | |
| change in tax liabilities | |
| change in accruals | |
| change in accounts payable | |
| II. Cash flow from investment activity | |
| 1. Investment in fixed assets | |
| 2. Investment in financial fixed assets | |
| III. Cash flow from financial activity | |
| 1. Change in long-term debt | |
| 2. Dividends paid | |
| 3. changes in equity | |
| net flow | |
| Cash balance at the beginning of the period | |
| Cash balance at the end of the period | |
| Capital requirements |