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    Unit 3 - Business Finance - Appendix

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    mhmir9.95
    The document contains a cash flow forecast for Abacus Traders from June to December 2020, showing expected monthly sales, purchases, wages, and other expenses. It also provides additional information on cash on hand, a loan for delivery vans, shop rental payments, credit terms, and sublet rental income. The document includes a break-even analysis, trial balance as of December 2020, ratio benchmarks from a competitor, and adjustments needed for the trial balance.

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    Unit 3 - Business Finance - Appendix

    Uploaded by

    mhmir9.95
    35 views5 pages
    The document contains a cash flow forecast for Abacus Traders from June to December 2020, showing expected monthly sales, purchases, wages, and other expenses. It also provides additional information on cash on hand, a loan for delivery vans, shop rental payments, credit terms, and sublet rental income. The document includes a break-even analysis, trial balance as of December 2020, ratio benchmarks from a competitor, and adjustments needed for the trial balance.

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    The document contains a cash flow forecast for Abacus Traders from June to December 2020, showing expected monthly sales, purchases, wages, and other expenses. It also provides additional information on cash on hand, a loan for delivery vans, shop rental payments, credit terms, and sublet rental income. The document includes a break-even analysis, trial balance as of December 2020, ratio benchmarks from a competitor, and adjustments needed for the trial balance.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    35 views5 pages

    Unit 3 - Business Finance - Appendix

    Uploaded by

    mhmir9.95
    The document contains a cash flow forecast for Abacus Traders from June to December 2020, showing expected monthly sales, purchases, wages, and other expenses. It also provides additional information on cash on hand, a loan for delivery vans, shop rental payments, credit terms, and sublet rental income. The document includes a break-even analysis, trial balance as of December 2020, ratio benchmarks from a competitor, and adjustments needed for the trial balance.

    Copyright:

    © All Rights Reserved
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    Download as pdf or txt
    of 5

    Appendix

    Section 1: Abacus Traders - Cash Flow Forecast (June to December 2020)

    Month Sales Purchases Wages Mfg. Exp. Office Exp. Selling Exp.
    £ £ £ £ £ £ £
    June 180,000 110,000 10,000 3,000 3,000 3,000
    July 192,000 134,000 10,000 4,500 3,000 4,000
    August 198,000 135,000 10,000 4,500 3,500 5,000
    September 146,000 105,000 10,000 3 000 2,000 4,000
    October 274,000 226,000 10,000 6,000 2,500 3,000
    November 140,000 104,000 10,000 3,500 2,000 3,000
    December 130,000 103,000 10,000 3,000 2,000 3,000

    Additional Information:
    (a) Cash in hand on 1st June 2020 was £25,000.
    (b) Abacus Traders has taken a loan from bank of £540,000 to acquire two delivery vans. The
    bank offered Abacus to design their own repayment plan according to their requirements.
    Abacus opted to repay the loan amount by dividing it equally over 36 months.
    (c) Abacus rented a new shop in town center on 1st January 2020 for an annual rent of
    £96,000. The rent is to be paid in equal quarterly installments. First installment was due
    on 1st January 2020
    (d) All sales and purchases are made on credit basis
    (e) 50% of credit sales are realized in the month following the sale and the remaining 50% in
    the second month following.
    (f) On 1st June 2020, Abacus Traders received cash for previous sales totally £81,000.
    (g) Creditors are paid in the month following the month of purchase
    (h) All expenses, including wages, manufacturing expense, office expense and selling
    expenses are paid off in the month in which they occur
    (i) Abacus Traders have sub-let one of their warehouses in town for an annual rent of
    £30,000. The rent will be received by Abacus Traders in two installments, in June and
    December respectively.

    1
    Section 2 - Break-even Calculations

    The marginal costing of Abacus Traders is as follows; £

    Sales (5,000 units at £4 per unit) 20,000

    Variable costs (direct materials, direct labour, etc.) 8,000

    Contribution 12,000

    Fixed cost 7,500


    Profit 4,500

    2
    Section 3 – Financial Record for the year 1st January 2020 to 31st December 2020
    The company’s trial balance as at 31st December 2020 and further information is shown below.

    Abacus Traders Trial Balance as at 31-12-2020 DEBIT CREDIT

    £ £

    Property 85,000

    Equipment 40,000

    Depreciation provisions:

    Property 6,375

    Equipment 23,125

    Purchases 688,000

    Sales 892,000

    Inventory at 01/01/2020 24,500

    Discounts allowed 7,500

    Discounts received 2,500

    Returns outward 2,600

    Directors Remuneration 58,500

    Trade Payables 58,000

    Trade Receivables 85,000


    Bank 6,600
    Cash in hand 600
    Drawings 29,270
    Selling, general and administrative expenses 38,500
    Interest Expense 0
    Long term loan 35,000
    Capital 30,670
    1,056,870 1,056,870

    3
    The following adjustments need to be taken into account:
    1. Inventory at 31/12/2020 is £21,600
    2. Directors’ remuneration outstanding (accruals) at 31/12/2020 was £4,100.
    3. Selling, general administrative expenses include a prepayment for rates of £1,000
    4. Depreciation for the year has still to be provided as follows:
    - Property 1.5% per year using the straight-line method
    - Equipment 25% per year using the reducing balance method
    5. Loan interest of £2,000 is outstanding

    4
    Section 4 – Ratio Analysis
    Alpha Supplies is a competitor to Abacus Traders and is known for setting the industry benchmark
    for financial health. The following ratios were obtained for Alpha Supplies for the yearended 31st
    December 2020.

    Alpha Supplies Ratios

    Gross Profit margin 55%

    Net profit Margin 24%

    Return on Capital Employed 15%

    Current Ratio 2:1

    Acid Test Ratio 1:1

    Trade Receivables Turnover 15 days

    Trade Payables Turnover 25 days

    Inventory Turnover 15 days

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