...Quantitative techniques in management by n d vohra, 4th edition, example 13.15, pg 728 Problem a company (say X) is thinking of introducing a product (say P) in the market. For reasons of simplicity, it has categorized the expected sales as ‘high’ and ‘low’. In the past, other companies have also sold products similar to P and the sales of these products have been analysed (historical data). Based on this historical data, X has estimated the probability of the volume of the sales and corresponding monetary inflow / outflow. This estimation is … Volume of sales (E1) is estimated to be … | Probability of occurrence of E1 | inflow / outflow if product is launched | High | 30% | An inflow of Rs 150,000 | Low | 70% | An outflows of Rs 40,000 | X can hire market-research (mr) company to survey the market. The outcome of the survey can be … * High * Low * No statement (ie the surveyors are unable to make a recommendation) In the past, many surveys were conducted by mr companies for products similar to P. data* is available for volume of sales that took place after {the survey was done and the recommendations were made by the surveyor}. *historical data Based on this historical data, X makes following conclusions … Actual volume of sales of the products = high | 50% (a) of the corresponding mr reports had forecasted that the sales volume will be high | | 20% (b) of the corresponding mr reports had forecasted that the sales volume will be...
Words: 1274 - Pages: 6
...Over to You - Chapter 12 - Cash Flow 1) a) 1800+700=£2500 b) 800+200+1200+400+320+80=£3000 c) -£500 2) He is facing cash flow crisis because his cash outflows are greater than his cash inflows by £500, so he has a negative net cash flow. This is mainly due to the amount he is paying his staff, as it is the largest cash outflow, if this is lowered (i.e. he lets some staff go, or reduces wages) he could have a better cash flow position. 3) This will improve his cash flow because it will lower the cash outflows for a period of time. This means that no cash will be going out of the business for that month, improving its cash flow position. The risk is though, that suppliers will refuse to sell any more products until they have paid back all of their invoices. So they would get less products to sell to improve the cash flow position. 4) I think that cutting back on orders of food would improve his cash flow to some extent because, it would mean less food overall would be wasted, as the same amount of orders would be made, so cash inflows would stay the same, but cash outflows would drop. This would improve the cash flow position. However, if this happens, the quality of the meals would drop, as they would use the bad parts of food, that would usually be thrown away, this could cause less repeat purchase in the business because people would not want to go to a restaurant that sells poor quality food, especially if he has a competitor near by that could sell high quality...
Words: 626 - Pages: 3
...CASH MANAGEMENT Cash is often called liquid assets or nonearning assets. It is needed to pay salaries, raw materials, repayment of loan and others. Specifically there are 3 major motives of holding cash which are: |Transaction motives |The level of funds required due to the ordinary course of business | | |It is needed to meet ordinary payment such as paying bills, employees’ salaries, creditors and etc | |Precautionary motives |The funds needed to meet contingency requirement | | |Funds needed to reserve for emergency needs, unforeseen fluctuation in cash flows or unexpected seasonal | | |needs | | |It serves as a safety cushion against the unexpected cash drain that may arise because of risk and | | |uncertainty regarding the future | |Speculative motives |To hold sufficient cash to enable the firm to take advantage of any unexpected bargain or opportunities | | |which may arise from time to time such as trade discounts or some short term investments...
Words: 353 - Pages: 2
... SONAL AGARWAL DAYALBAGH EDUCATIONAL INSTITUTE (DEEMED UNIVERSITY) DAYALBAGH, AGRA MEANING OF CASH BUDGET:A forecast of estimated cash receipts and disbursements for a specified period of time. CASH BUDGET FOR JANUARY Beginning Cash Balance $28,000 Cash Collections on Sales (60 day lag) $47,000 Sold old machine in January 3,000 Investment Revenues 2,000 Total Cash Inflows 52,000 Disbursements for Manufacturing (30 day lag) 12,400 Marketing Expenses 10,000 General & Administrative Expenses 26,000 Capital Expenditures - 0 - Repayments on Debt 750 Debt Interest Payments 450 Dividend Payments - 0 - Taxes Paid - 0 - Total Cash Outflows 49,600 Net Cash Inflow (Outflow) 2,400 2,400 Ending Cash Balance 30,400 Minimum Desired Cash Balance 10,000 Cash Surplus or (Deficit) $20,400 MEANING OF SALES BUDGET:The sales budgets the most important functional budget. The forecasted quantities of sales and value of sales are presented in this budget. TABLE 1 — SALES FORECAST Product Volume Price Total Sales Lace Shoes 16,000 $ 45.00 $ 720,000 MEANING OF PRODUCTION BUDGET:It is a plan of forecast of the output of the business divided into various products. TABLE-2PRODUCTION BUDGET Planned Sales (table 1) 16,000 Desired Ending Inventory 1,500 Total Units 17,500 Less Beginning Inventory (3,000) Planned Production 14,500 TABLE 3 — MATERIALS BUDGET ...
Words: 436 - Pages: 2
...Sophisticated Petites Monthly Cash Flow Projections January Sales Richmond Row Masonville Galleria Cash Inflow Cash Outflows Cost of Goods Sold General & Admin General & Admin Variable Advertising Wages Salary Other Expenses 62,500 58,333 February 62,500 58,333 March 62,500 58,333 55,000 175,833 April 62,500 58,333 55,000 175,833 May 62,500 58,333 55,000 175,833 June 62,500 58,333 55,000 175,833 July 62,500 58,333 55,000 175,833 August 62,500 58,333 55,000 175,833 September 62,500 58,333 55,000 175,833 October 62,500 58,333 55,000 175,833 November December 62,500 58,333 55,000 175,833 62,500 58,333 55,000 175,833 Year End 750,000 700,000 550,000 2,000,000 120,833 120,833 105,000 3,750 3,021 1,667 7,503 3,333 25,433 105,000 3,750 3,021 1,667 7,503 3,333 25,433 105,000 5,750 4,396 1,667 7,503 3,333 25,433 105,000 5,750 4,396 1,667 17,295 3,333 25,433 105,000 5,750 4,396 1,667 17,295 3,333 25,433 105,000 5,750 4,396 1,667 17,295 3,333 25,433 105,000 5,750 4,396 1,667 17,295 3,333 25,433 105,000 5,750 4,396 1,667 17,295 3,333 25,433 105,000 5,750 4,396 1,667 17,295 3,333 25,433 105,000 5,750 4,396 1,667 17,295 3,333 25,433 105,000 5,750 4,396 1,667 17,295 3,333 25,433 105,000 5,750 4,396 1,667 17,295 3,333 25,433 1,259,999 65,000 50,000 20,000 178,159 40,000 305,198 Cash Inflow (28,873) (28,873) 22,752 12,960 12,960 12,960 12,960 12,960 12,960 12,960 12,960 12,960 81,643...
Words: 356 - Pages: 2
...Controls for Outflows Improper recording of costs and expenses are common errors in financial statements. Fraud is common in payroll, accounts payable, and cash disbursements. Errors and fraud can be prevented when controls for outflows in purchasing, accounts payable, cash disbursements, finance, investments, and payroll are performed. This proposal recommends and explains the controls in detail and describes the importance of the controls for each area. Purchasing: Purchases are requested by people who know what the organization needs. Purchasing is a vital component in any business. With internal controls in effect potential risk or fraud will be reduced. Companies that do not have adequate internal controls in place are in danger for opportunities for fraud, theft, and misuse. The recommendations for internal controls that relate to purchasing will follow. Separation of duties assigns functions to different people. No one person has complete control over all buying activities with proper segregation. The best practice is to have different people approve purchase, receive materials, approve invoices for payment, review and reconcile financial records, and to perform inventory counts. Consequences for not separation of duties are: * Unauthorized or unnecessary purchases made * Improper charges made to department budgets * Excessive costs incurred * Goods purchased for personal use (Internal Control Practices: Purchasing, 2009). Accountability, authorization...
Words: 2040 - Pages: 9
...Controls for Outflows Accounting 544 / Internal Control Systems Department of Accounting February 16, 2015 Organizations are always fighting to prevent fraud from happening in their day-to-day operations. Fraud can occur almost anywhere within an organization, but it is common in areas of the expenditure cycle because of inadequate recording of transactions or the uncertainty of when to record transactions. When actions such as these occur, the organizations financial statements are understated which causes concerns for financial statement users. For these reasons, organizations need to implement strong internal controls to prevent errors or fraudulent activities from occurring within their daily operations. Team B will discuss several proposals for implementing appropriate controls to cover purchasing, accounts payable, cash disbursements, finance, investment, and payroll. Purchasing According to Louwers, Ramsay, Sinason, and Strawser (2007), purchasing is the gaining of goods or services for the expenditure of cash. It affects more accounts in the general ledger than any other action. It affects inventory, cash, and accounts payable just to name a few (Chapter 8, Acquisition and Expenditure Cycle). Typical source documents for purchasing include invoices from suppliers and vendors, purchase orders, receiving reports made when orders arrive, purchase journal, and fixed asset report. There may be occasions when some items in inventory is unaccounted for due to missing...
Words: 1875 - Pages: 8
...Substantive Procedures for Cash Outflow Irregularities Substantive Procedures for Cash Outflow Irregularities Apollo Shoes has recognized that there is a risk of loss due to irregularities in cash outflows, accounts payable, and payroll. Substantive procedures for cash outflows, accounts payable, and payroll are needed to detect irregularities in each of these. Failure to implement appropriate procedures will lead to loss irregularities. Substantive Procedures to Evaluate Cash Irregularities Substantive procedures for detecting irregularities in the cash cycle follow normal audit procedures of testing internal controls over cash and by collecting and evaluating audit evidence are needed. Following instruction set forth by Joe Bootwell, Chief Financial Officer (CFO), Karina Ramirez, Director of Internal Audit, established the following procedures for testing cash irregularities (University of Phoenix, 2013). 1. Cash receipt procedures. Confirm that persons receiving cash are authorized. Evaluate mailroom cash receipt procedures. Confirm that surveillance cameras are recording properly. Confirm pre-numbered receipts are issued. Evaluate procedures for out of sequence receipts. Confirm cash deposits are made by a person other than those approved to receive cash. Confirm deposit reconciliations are made by a person other than the persons receiving and depositing cash. 2. Cash receipts are deposited daily and are in complete (Louwers, et al, 2011)...
Words: 988 - Pages: 4
...Emerging Merging Economies and the Sudden Income Inflows or Outflows Name Tutor Institution Course Date Emerging Merging Economies and the Sudden Income Inflows or Outflows The concept of emerging economies is often used to provide a description of the aspects of a particular country’s economy developing towards a more advanced state (Giudice, Peruta, & Carayannis, 2014). It is often by the means of a rapid growth and the process of industrialization in the country. Nonetheless, these nations are often experiencing an expansion role in both the world’s economy and the political frontier. According to various authors, the concept of cash inflows refers to the money that an organization receives as a result of the operating activities, the financial activities, and the investment activities (Hoque, 2005). On the other hand, cash outflows refer to the total outgoing funds from a company in a particular period. It also includes expenses such as salaries, maintenance, supplies, servicing debts, and the payments of dividends. Regarding the aspects of the topic, there is a need to create an analysis of the interpretations of the markets with regards to the inflow and outflow of income. The developments of a capital market in a nation will offer a significant influence on the amount of money that is received in the market as compared to the expenses that the relevant institutions are to incur. It is, however, important to write about this topic since it offers an interpretation...
Words: 2381 - Pages: 10
...How Could Age Dependency Ration Influence The Savings And Following Capital Outflow. Introduction. The aim of my work it to analyze how the age dependency ration influences the saving. According to the definition of the World Bank, Age dependency ratio is the ratio of dependents-people younger than 15 or older than 64--to the working-age population--those ages 15-64. So the questions of my research is to find out how the quantity of pre-working-aged children and retired influences the saving per capita. Would people save more in their working age in order to save money for retirement period or to invest -or they will earn and spend. Another issue is to see if countries with huge level of GDP( China, the USA) have the different extent of ADR influence on savings and how it is differ from Russia and ,for instance, Brazil. This problem is actual and important because nowadays countries face the problem of capital outflow . As we can see from the current statistics databases, there were such demographical crisis since the 1950 , especially in Asian countries and because they are mostly overpopulated, it has an impact on the world situation in general. According to the theoretical economic models, Investment=Savings, so if I define what impact have demographical structure of population on saving per capita I could predict the future saving and investment in countries using the obtained results of influence. The model. To define, what could also has the impact on savings and...
Words: 2039 - Pages: 9
...Chapter 18 (31) Practice Test Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. International trade a. | raises the standard of living in all trading countries. | b. | lowers the standard of living in all trading countries. | c. | leaves the standard of living unchanged. | d. | raises the standard of living for importing countries and lowers it for exporting countries. | ____ 2. Net exports of a country are the value of a. | goods and services imported minus the value of goods and services exported. | b. | goods and services exported minus the value of goods and services imported. | c. | goods exported minus the value of goods imported. | d. | goods imported minus the value of goods exported. | Table 31-1 Argentinean Trade Flows | Goods | | Services | | PurchasedAbroad | $40 billion | PurchasedAbroad | $20 billion | Sold Abroad | $10 billion | Sold Abroad | $25 billion | ____ 3. Refer to Table 31-1. What are Argentina’s exports? a. | $60 billion | b. | $35 billion | c. | $10 billion | d. | None of the above are correct. | ____ 4. Refer to Table 31-1. What are Argentina’s imports? a. | $60 billion | b. | $35 billion | c. | $40 billion | d. | None of the above are correct. | ____ 5. Refer to Table 31-1. What are Argentina’s net exports? a. | $30 billion | b. | $5 billion | c. | -$5 billion | d. | -$25 billion | ____ 6. Sonya, a citizen of...
Words: 2401 - Pages: 10
...Analyzing a Summary Analysis for Candela Corporation Analyzing a Summary Analysis To analyze a statement of cash flow means to investigate the cash flow of a company's operations, and study the cash inflows and outflows. Candela had severe growth in 2002 that severely affects the net cash of operating activities. Analyzing the cash flow may have given Candela the opportunity to change its cash from operations. An analysis of a cash flow will give the reader an indication of what changes would improve the company's growth. A cash flow statement divides three functions of a business into operating, investing, and financing. Interpreting the information is essential for a creditor, banker, investor, or even management. The cash flow provides details of cash changes between the periods of other statements. One of the most important factors is how the cash outflow reduces the inflows, and the effect each may have on operations. The details from the cash are taken from the balance and income statements (Fraser & Ormiston, 2007).. The Candela Corporation provides laser systems for the medical field. Performance of laser treatments are cosmetic, or necessary removal of a variety of undesirable physical appearances. Candela provides laser systems worldwide. An increasing desire of improving physical appearance among Baby Boomers contributes to Candela's growth in the 1990s (Fraser & Ormiston, 2007). In 2002, Candela's consolidated cash flow statement shows a net cash from operations...
Words: 872 - Pages: 4
...|March | | | | |1 |Ray Hawk invested $70 000 of cash to start the business. |yes |Financing inflow | |2 |Purchased supplies of $200 on credit. |no | | |4 |Paid $60 000 cash for a building to use for storage. |Yes |Investing outflow | |6 |Performed services for customers and received cash, |Yes |Operating inflow | | |$3 000. | | | |9 |Paid $100 on accounts payable. |Yes |Operating outflow | |17 |Performed services for customers on credit, |no | | | |$1 600. | | | |23 |Received $1 200 cash from a customer on...
Words: 582 - Pages: 3
...TOY WORLD - Seasonal Production This spreadsheet replicates Case Exhibits 1 and 2 under the assumption of zero interest rates. Please complete the cash flow statement below. Then replicate the entire model for level production. Hint: remember that COGS=Beginning Inventory+Labor+Materials-Ending Inventory! INCOME STATEMENT month: 12 1 2 3 4 5 6 7 8 9 10 11 12 Sum Sales 120 140 160 140 140 140 160 1620 1840 2140 2285 1115 10000 Cost of Goods Sold 84 98 112 98 98 98 112 1134 1288 1498 1600 780 7000 Gross Profit 36 42 48 42 42 42 48 486 552 642 686 334 3000 Cash OpExp (assumed) 190 190 190 190 190 190 190 190 190 190 190 190 2280 Depreciation (assumed) 10 10 10 10 10 10 10 10 10 10 10 10 120 Total Operating Expenses (from case) 200 200 200 200 200 200 200 200 200 200 200 200 2400 EBIT -164 -158 -152 -158 -158 -158 -152 286 352 442 486 134 600 Interest Expense 0 0 0 0 0 0 0 0 0 0 0 0 0 Interest Income 0 0 0 0 0 0 0 0 0 0 0 0 0 EBT -164 -158 -152 -158 -158 -158 -152 286 352 442 486 134 600 Taxes -56 -54...
Words: 593 - Pages: 3
...currency exchange rate difference and deferred taxes. The working capital analysis showed that there was a significant increase in the inventory, receivables, and tax payables. The working capital also showed that the Candela Corporation’s payable accounts, warranty costs, and other company assets decreased at a small margin. There was a gross outflow of cash that was a result from the adjustments of the working capital and it caused the outflow of cash to be in the operating activities. As it pertains to the financing activities, the Candela Corporation tried to bring their outflow under control by borrowing small debt and using share issue but because of commitments the company had already made, it had to pay back the company’s existing debt and buy the stock back. Because of this the company had an outflow of cash again, but this time with financing activities. As it pertains to investing activities, the purchases of fixed assets were the only item and that caused an outflow in investing activities. Because the results of the investing, financing, and operating activities are negative; the Candela Corporation had a net cash outflow. 2003 The Candela Corporation had a net profit of $ 6,814,000. The foreign exchange rate difference, notional interest on stock warrants, and discounted operations were...
Words: 787 - Pages: 4
