ENT1/6 FINANCIAL MANAGEMENT SKILLS ASSIGNMNET

The following information relates to Umoja investments for the months of May, June, July and August 2015

• Opening balances as at 1^st May 2012 was shs 320,000
• Output of 800,900,700 and 100 units were sold at shs 500 each during the months of May, June, July and August respectively
• Loans of shs 500,000 and shs 300,000 were obtained from inland bank ltd in June and August
• Receipts from debtors of shs 100,000, shs 80,000 and shs 30,000 were registered for the months of June, July and August respectively
• Purchases of 700, 800, 900 and 1,000 units of raw materials were made in the months of May, June, July and August respectively at a cost of shs 200 per unit
• Labour cost for the months of May, June July and August were shs 150,000, shs 120,000, shs 100,000 and 140,000 respectively
• A machine was bought and paid for in July for shs 1,000,000
• Monthly fixed cost of shs 20,000 per month were paid
• Monthly rent receivable from a shoe-shiner shs 50,000

Required:

Prepare a statement showing cash inflows and cash outflows for the months of May to August 2015

Comment on the cash position of Umoja Investments ltd. For the four months

suggest measures which should be under taken to avoid a deficit in the cash flow

GAGAMEL ENTERPRISES LIMITED located in Masindi wishes to operate a restaurant in Kigumba town soon and below is summary of its cash projections for the first three months of the year i.e. January to march 2014

• Cash sales shs 1,860,000 and shs 930,000 respectively
• Loan from Faulu Uganda ltd shs 1,450,000 in January
• Receipts from debtors shs 890,000 in February and shs 925,000 in march
• Cash purchases of shs 720,000, shs 480,000 and shs 240,000 respectively
• Monthly direct wages of shs 48,000
• Administrative expenses of shs 63,000 however expected to reduce by shs 2,000 after a month
• Electricity of shs 48,000 per month to be incurred and paid
• Selling expenses of shs 20,000 and shs 15,000 in January and march respectively
• Corporation tax of shs 226,900 to be paid immediately after a month of commencement of operation
• Cash purchase shs 250,000 in February, to be paid for the following month
• A cash deficit in a given month is to be offset by getting a loan in the following month.

Required

Use the above information to prepare a cash flow statement for the given period

Comment on the cash position of the business

Suggest measures that the business can undertake in case of a cash flow short fall

Vivian is a student of S.6 and she plans to open up a restaurant in her S.6 vacation. Here is a summary of her cash plan for the first three months of the year

• Cash sales shs 1,860,000, shs 1,395,000 and shs 930,000 respectively
• Loan form youth Development fund shs 1,450,000 in January
• Receipts from debtors shs 890,000 in February and shs 9,250,000 in march
• Cash purchase of shs 720,000, shs 480,000 and shs 240,000 respectively
• Direct wages of shs 48,000 each month
• Administrative expenses shs 63,000, shs 61,000 and shs 61,000
• Electricity shs 30,000 per month
• Selling expenses shs 20,000, shs 150,000 in January and March respectively
• Taxes shs 226,000 to be paid in march
• Cash purchases of assets shs 2,900,000 in January
• Credit purchases shs 250,000 in February to be paid for the following month
• A cash deficit is offset by getting a loan in the following month

Required

1. Prepare a cash flow statement for the given period
2. Comment on the cash position of the business
3. Suggest measures that Vivian can take to avoid cash flow deficits

Jabex limited a company dealing in general merchandise, expected opening balance of shs 30 million in January 2014. The budgeted sales for the months were as given below

Month                                                shs (000)

November 2013                                 80,000

December 2013                                  90,000

January 2014                                     75,000

February 2014                                   75,000

March 2014                                        80,000

Analysis of records shows that customers settle their debts in their following pattern

• 60% within the month of sales
• 25% the following month
• 15% in the second month after sale.

Extracts from the purchase budgeted were as follows

(Shs 000)

December                                 60,000

January                                    55,000

February                                   45,000

March                                       55,000

• All purchases are collected on credit and past experience show that 90% are settled in month of purchase and the balance in the following month.
• Wages of 15 million, transport (expenses) of shs 20 million including depreciation of 5 million are settled monthly
• Tax of shs 8 million is to be paid in February and the company will receive settlement of an insurance claim of shs 25 million in March.

Required

Prepare the statement of cash flow for the business for three months starting with January 2014.

Interpret the net cash position of the business

The following balance was extracted from the final statements of JAK`S business at the end of the 2015

Shs

Sales                                                                     288,000,000

Total fixed assets                                                   65,500,000

Average debtors                                                    90,000,000

Opening stock                                                        40,200,000

Closing stock                                                         50,400,000

Cost of sales                                                          201,600,000

Total current assets                                               36,100,000

Equity capital                                                         68,400,000

Total current liabilities                                            16,800,000

Net profit before interest and tax                            40,600,000

Long term liabilities                                                38,500,000

Interest expenses for the year                                5,700,000

Required;

1. Compute the following ratios
2. Gross profit margin
3. Stock turn over
4. Debtor’s collection days
5. Leverage ratio
6. Working capital ratio
7. Net profit margin
8. Interest cover

The following balances were extracted from BAM SHOPPING`s books of account on 31 12 2017

PARTICULARS                                            SHS

Net sales                                            20,000,000

Net purchases                                    11,000,000

Goods available for sale                       16,000,000

Stock on 1.Jan 2017                              5,000,000

Stock on 31 Dec 2017                           4,000,000

Total operating expenses                       6,000,000

Total fixed assets                                   8,000,000

Debtors                                                 1,500,000

Creditors                                               3,000,000

Cash                                                        900,000

Outstanding rent                                    1,000,000

Bank                                                     1,600,000

Required

Calculate and interpret the following ratios

1. Inventory turnover ratio
2. Credit payment period
3. Rate of return on capital employed
4. Stock turnover period
5. Cash ratio
6. Profit mark up

1. The following information was obtained from the books of Collins as at 31.12.2013

Calculate the following

a) Cost of goods sold

b) Turn over

c) Gross profits

d) Net profits

e) Fixed capital

f) Working capital

g) Capital owned

h) Current ratio

i) Rate of return on capital employed

j) Current ratio

k) Rate of stock turn

l) Average payment period

m) Average collection period for debit in month

n) Debit ratio