Imagine you are the finance manager of Al Mohsin Company. The company management feels that the cash management of the company should be made more effective. The following information from the company’s records is available to you: Miscellaneous Month Sales Purchase Wages expenses February 40,000 20,000 7,000 1,000 March 55,000 14,000 8,000 3,000 April 60,000 28,000 9,000 2,000 May 74,000 30,000 9,000 2,000 June 90,000 32,000 8,800 3,500
Imagine you are the finance manager of Al Mohsin Company. The company management feels that the cash management of the company should be made more effective. The following information from the company’s records is available to you:
|
|
|
|
|
Miscellaneous |
|
Month |
Sales |
Purchase |
Wages |
expenses |
|
February |
40,000 |
20,000 |
7,000 |
1,000 |
|
March |
55,000 |
14,000 |
8,000 |
3,000 |
|
April |
60,000 |
28,000 |
9,000 |
2,000 |
|
May |
74,000 |
30,000 |
9,000 |
2,000 |
|
June |
90,000 |
32,000 |
8,800 |
3,500 |
Additional Information
- Al Mohsin LLC expects to have RO 8,000 cash balance at the beginning of April.
- Period of credit allowed by suppliers – 2 months
- 40% of the total sale is for cash. Half of the credit sale is collected in the next month of sale and the remaining half in the following month after that.
- Delay in payment of wages 1/4 month
- Delay in payment of expenses 1/2 month
- Income tax to be paid in the month of June RO 1,500.
You are required to :
A-Prepare an estimate of cash position for three months from April to June. (4 marks)
B-Based on the budget prepared, evaluate the cash position of the company, give your comments and provide suitable suggestion to the management on effective cash management. (1 mark)
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