JUDLAH SERVICES LIMITED Judlah Services Limited has been trading for the past five years. Last year they have recently realized that they are experiencing frequent cash flow issues. Their financial accountant has suggested the tracking of the inflows and outflows of the company’s cash. The following information on revenue and costs were made available to you: Month Sales Purchases ($’000) ($’000) October 2020 1 400 000 1 137 500 November 2020 1 050 000 787 500 December 2020 1 575 000 1 312 500 January 2021 875 000 612 500 February 2021 1 050 000 787 500 March 2021 1 225 000 962 500 April 2021 1 050 000 787 500 Additional notes: The cash balance on January 01st 2021 was $262 500; 20% of sales is usually attributable to cash sales while the remainder is settled: One month after sales: 60%; Two months after sales: 20%. 2% of sales is allocated to Sales Expenses and is paid in the month of sale; 50% of cost of purchases is paid in the month of purchase and the next 50% in the following month; 3% of purchases is allocated to Purchases Expenses and is paid in the following month after purchase; New equipment of $157 500 to be purchased in January and is to be paid in three equal instalments from the same month; Outdated equipment to be sold in February for $43 750; Salaries are $52 500 per month; Utilities will be $122 500 in January and is expected to increase by 10% each month; and The firm plans to take a loan in March at an interest rate of 15% per annum. The loan amount will be $700 000. Interest is to be paid monthly equally, starting in March. After proper tracking of their cash flow last year Judlah Services Limited has found themselves in a position where they have too much cash. The top management has established that the minimum amount of cash to hold should be $100 000. The accountant has also indicated that the daily cash flow for the business is $60 000. The finance manager has indicated that the annual interest rate is 10.95% and that the cost of selling one of Judlah Services Limited’s security is $90. Recording cash and cash equivalents at $443 216.97 Judlah Services Limited’s top management has decided to utilize the cash amount over the cash return point to invest in a two-asset portfolio. Asset 1 will be allocated 33% while asset 2 will be allocated 67% of the excess cash. Three stocks trading on the JSE have been identified for analysis JBM, TCL and SAG. The following information has been given from the chief financial officer: Economic Condition JBM TCL SAG Boom 30% 20% 8% Neutral 10% 12% 3.5% Recession -3% -4% -2% Asset Combinations to consider: Asset 1 JBM and Asset 2 TCL (with a correlation of .90); Asset 1 SAG and Asset 2 JBM (with a correlation of .75); or Asset 1 SAG and Asset 2 TCL (with a correlation of -.40). Required: As the junior financial analyst, you have been approached by the CFO to help with the following: Prepare a cash budget for the four-month period ending April 30th, 2021.

JUDLAH SERVICES LIMITED Judlah Services Limited has been trading for the past five years. Last year they have recently realized that they are experiencing frequent cash flow issues. Their financial accountant has suggested the tracking of the inflows and outflows of the company’s cash. The following information on revenue and costs were made available to you: Month Sales Purchases ($’000) ($’000) October 2020 1 400 000 1 137 500 November 2020 1 050 000 787 500 December 2020 1 575 000 1 312 500 January 2021 875 000 612 500 February 2021 1 050 000 787 500 March 2021 1 225 000 962 500 April 2021 1 050 000 787 500 Additional notes: The cash balance on January 01st 2021 was $262 500; 20% of sales is usually attributable to cash sales while the remainder is settled: One month after sales: 60%; Two months after sales: 20%. 2% of sales is allocated to Sales Expenses and is paid in the month of sale; 50% of cost of purchases is paid in the month of purchase and the next 50% in the following month; 3% of purchases is allocated to Purchases Expenses and is paid in the following month after purchase; New equipment of $157 500 to be purchased in January and is to be paid in three equal instalments from the same month; Outdated equipment to be sold in February for $43 750; Salaries are $52 500 per month; Utilities will be $122 500 in January and is expected to increase by 10% each month; and The firm plans to take a loan in March at an interest rate of 15% per annum. The loan amount will be $700 000. Interest is to be paid monthly equally, starting in March. After proper tracking of their cash flow last year Judlah Services Limited has found themselves in a position where they have too much cash. The top management has established that the minimum amount of cash to hold should be $100 000. The accountant has also indicated that the daily cash flow for the business is $60 000. The finance manager has indicated that the annual interest rate is 10.95% and that the cost of selling one of Judlah Services Limited’s security is $90. Recording cash and cash equivalents at $443 216.97 Judlah Services Limited’s top management has decided to utilize the cash amount over the cash return point to invest in a two-asset portfolio. Asset 1 will be allocated 33% while asset 2 will be allocated 67% of the excess cash. Three stocks trading on the JSE have been identified for analysis JBM, TCL and SAG. The following information has been given from the chief financial officer: Economic Condition JBM TCL SAG Boom 30% 20% 8% Neutral 10% 12% 3.5% Recession -3% -4% -2% Asset Combinations to consider: Asset 1 JBM and Asset 2 TCL (with a correlation of .90); Asset 1 SAG and Asset 2 JBM (with a correlation of .75); or Asset 1 SAG and Asset 2 TCL (with a correlation of -.40). Required: As the junior financial analyst, you have been approached by the CFO to help with the following: Prepare a cash budget for the four-month period ending April 30th, 2021.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter6: Statement Of Cash Flows

Section: Chapter Questions

Problem 17E

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JUDLAH SERVICES LIMITED

Judlah Services Limited has been trading for the past five years. Last year they have recently realized that they are experiencing frequent cash flow issues. Their financial accountant has suggested the tracking of the inflows and outflows of the company’s cash.

The following information on revenue and costs were made available to you:

Month	Sales	Purchases
	($’000)	($’000)
October 2020	1 400 000	1 137 500
November 2020	1 050 000	787 500
December 2020	1 575 000	1 312 500
January 2021	875 000	612 500
February 2021	1 050 000	787 500
March 2021	1 225 000	962 500
April 2021	1 050 000	787 500

Additional notes:

The cash balance on January 01st 2021 was $262 500;
20% of sales is usually attributable to cash sales while the remainder is settled:
One month after sales: 60%;
Two months after sales: 20%.
2% of sales is allocated to Sales Expenses and is paid in the month of sale;
50% of cost of purchases is paid in the month of purchase and the next 50% in the following month;
3% of purchases is allocated to Purchases Expenses and is paid in the following month after purchase;
New equipment of $157 500 to be purchased in January and is to be paid in three equal instalments from the same month;
Outdated equipment to be sold in February for $43 750;
Salaries are $52 500 per month;
Utilities will be $122 500 in January and is expected to increase by 10% each month; and
The firm plans to take a loan in March at an interest rate of 15% per annum. The loan amount will be $700 000. Interest is to be paid monthly equally, starting in March.

After proper tracking of their cash flow last year Judlah Services Limited has found themselves in a position where they have too much cash. The top management has established that the minimum amount of cash to hold should be $100 000. The accountant has also indicated that the daily cash flow for the business is $60 000. The finance manager has indicated that the annual interest rate is 10.95% and that the cost of selling one of Judlah Services Limited’s security is $90.

Recording cash and cash equivalents at $443 216.97 Judlah Services Limited’s top management has decided to utilize the cash amount over the cash return point to invest in a two-asset portfolio. Asset 1 will be allocated 33% while asset 2 will be allocated 67% of the excess cash. Three stocks trading on the JSE have been identified for analysis JBM, TCL and SAG. The following information has been given from the chief financial officer:

Economic Condition	JBM	TCL	SAG
Boom	30%	20%	8%
Neutral	10%	12%	3.5%
Recession	-3%	-4%	-2%

Asset Combinations to consider:

Asset 1 JBM and Asset 2 TCL (with a correlation of .90);
Asset 1 SAG and Asset 2 JBM (with a correlation of .75); or
Asset 1 SAG and Asset 2 TCL (with a correlation of -.40).

Required:

As the junior financial analyst, you have been approached by the CFO to help with the following:

Prepare a cash budget for the four-month period ending April 30th, 2021.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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