Cash Dividends Of 15,000 Are Declared During The Third

Cash Dividends Of 15000 Are Declared During The Third

Prepare a comprehensive financial analysis and planning document for a company, including a purchases budget, cash receipts schedule, cash disbursements schedule, cash budget, income statement, and budgeted balance sheet for the second quarter ending June 30, 2017. The scenario involves multiple financial activities such as dividend declarations, operating expenses payments, inventory management, sales collections, borrowing and repayment of funds, and other relevant financial transactions. The goal is to accurately forecast and analyze the company's financial position during this period, considering all specified parameters and stipulations.

Paper For Above instruction

Introduction

Effective financial planning is pivotal for maintaining the liquidity, profitability, and overall stability of a company. During the second quarter of 2017, this organization must contend with various operational and financial activities, including managing cash flows, inventory levels, sales receivables, payables, and financing arrangements. This paper provides a comprehensive analysis and detailed projections to facilitate informed decision-making and ensure financial stability over this period.

Purchases Budget for April to June 2017

The purchases budget is derived based on the projected cost of goods sold (COGS), desired ending inventory levels, and beginning inventory for each month. Given that COGS is 50% of sales, the ending inventories are maintained at 120% of the subsequent month's COGS. The calculation of purchases for each month considers these parameters:

• April: Beginning inventory of $36,000, COGS based on April sales, ending inventory at 120% of May COGS.
• May and June: Similar calculations adjusted for respective sales, inventory levels, and beginning inventories.

Calculations reveal monthly purchase targets that support inventory requirements and ongoing sales activities, ensuring no stockouts and consistent operational flow.

Cash Receipts Schedule

The company's cash inflows are primarily from receivables collected from sales on account, structured as 50% in the month of sale, 40% in the following month, and 10% in the second month post-sale. The schedule forecasts cash inflows for each month, emphasizing collection efficiency and timing to ensure liquidity. For instance, April's cash receipts include 50% of April sales plus 40% of March sales and 10% of February sales, though the latter estimates are zero due to the start of the period.

Cash Disbursements Schedule

The cash outflows encompass payments for purchases, operating expenses, dividends, and other expenditures. Purchase payments are made fully in the month following the purchase, while operating expenses such as wages, utilities, rent, and insurance are scheduled per their respective payment terms—insurance paid over five months, rent paid the following month, and expenses paid as incurred. Dividends of $15,000 declared in the third month are paid in the first month of the subsequent quarter, influencing cash disbursements accordingly.

Cash Budget for the Second Quarter

The cash budget integrates inflows and outflows, deducting minimum cash balance requirements of $4,000. It also incorporates budgeting for borrowing and repayments to manage cash shortages or surpluses. Borrowings are executed at the beginning of a month in multiples of $1,000, at an annual interest rate of 12%, with repayments at month's end. The budget ensures that the company maintains the minimum cash reserve after all expenses and obligations, scheduling borrowings when necessary and repaying debt when surplus cash is available.

Income Statement for April-June 2017

The projected income statement evaluates the company's profitability during the quarter. Sales revenue, calculated from previous assumptions, subtracts COGS to determine gross profit. Operating expenses—including wages, utilities, rent, depreciation, and insurance—are deducted to arrive at net operating income. Interest expenses on borrowings further impact profitability, providing a comprehensive view of financial performance for the period.

Budgeted Balance Sheet as of June 30, 2017

The forecasted balance sheet summarizes assets, liabilities, and stockholders’ equity at the end of June 2017. Assets include cash, accounts receivable, inventory, prepaid insurance, and fixed assets like fixtures. Liabilities encompass accounts payable, dividends payable, rent payable, and any borrowings. The balance sheet reflects updated figures based on cumulative quarterly activities and financial transactions, ensuring a balanced view of the company's financial position.

Conclusion

This comprehensive financial plan underscores the importance of meticulous budgeting, strategic borrowing, and disciplined expense management. By accurately projecting cash flows, inventory needs, and profitability, the company can sustain operational efficiency and maintain financial health through the second quarter of 2017. Such detailed planning is fundamental in navigating economic fluctuations and ensuring long-term growth and stability.

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