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    • Profile photo of John Moffat says

      January’s wages are 16000

      75% are paid in the current month, so 12,000 are paid in January
      25% are paid in the following month, so 4,000 are paid in February,

      February’s wages are 20,000

      75% are paid in the current month, so 15,000 are paid in February.
      25% are paid in the following month, so 5,000 are paid in March.

      So the total cash paid in February is 4,000 + 15,000 = 19,000

      It is the same workings for every month.

    • Profile photo of John Moffat says

      What opening inventory???

      I assume that you have the Course Notes in front of you (otherwise there would be no point in watching the lecture) and there is no mention of any opening inventory (and it would be irrelevant anyway since the questions tells us the purchases each month).

      (The $15,000 in the question is the opening cash balance – i.e. the cash at the start of January – and this is dealt with.)

      • Profile photo of John Moffat says

        True – it is not mentioned directly. However, since we are asked for a cash budget for Jan, Fed, Mar, it is reasonable to assume that it the opening balance for the period in question. (And if it was the opening balance at the beginning of November, then the question would be impossible)

  1. avatar says

    I do enjoy your lectures but i am not getting the %s used in Example one chapter 5. even the answers at the back are showing it the same way. For me 40% of 80000 is 32000. Please help me understand this. Thank you.

    • Profile photo of John Moffat says

      I assume you mean example 1 in Chapter 6?

      Also, I assume you are talking about the sales of 80,000 in November X1.
      40% of 80,000 is indeed 32,000. However they are the cash sales in November and therefore the cash would be received in November. We are preparing the cash budget for January onwards.

      It is only the credit sales in November where (because they are on credit) the cash will be received 2 months later – i.e. in January.

      So the cash receipts in January are the cash sales in January (40% x 110,000), plus the cash received from the credit sales made 2 months earlier (i.e. in November, so 60% x 80,000)

  2. avatar says

    For speculative motive isn’t better to be placed in a bank or buy short investment where one can get interest and dividend, whereas if one buy stock because its cheaper making savings one might say its like earning the interest and dividend, but what about the holding cost?

    • Profile photo of John Moffat says

      It really depends on the costs involved. The speculative motive is not saying that it is necessarily better – it is simply that if it is better then it is only possible if there is spare cash. There is no requirement to keep extra cash for the speculative motive – it is just a reason that some companies might choose to hold extra cash.

  3. Profile photo of chiclarence says

    Sir when i go through Kaplan i find that there are three methods by which cash forecasts can be prepared
    – receipts and paymens
    – balance sheet forcast
    – working capital ratios
    in the notes you treated only receipts and payments.
    are the other ones no longer part of the syllabus??

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