Question

Balance Sheet                                        2012                 2013

             Cash                                                   $50,000           $50,000

Accounts Receivables                         200,000           300,000   

Inventories                                          450,000           570,000

            Total Current Assets                         700,000           920,000

Fixed Assets, Net                                300,000           380,000

            Total Assets                               $1,000,000       $1,300,000

Accounts Payable                               130,000          $180,000    

Accruals                                                50,000              70,000

Bank Loan                                            90,000              90,000

            Total Current Liabilities                   270,000           340,000

Long-Term Debt                                 400,000           550,000

Common Stock ($.05 par)                    50,000              50,000

Additional Paid-in-Capital                200,000           200,000

Retained Earnings                                 80,000           160,000

            Total Liab. & Equity                    $1,000,000       $1,300,000

            Income Statement                                              2012                2013       

Net Sales                                        $1,300,000       $1,600,000

Cost of Goods Sold                             780,000          960,000

            Gross Profit                                       520,000          640,000

Marketing                                           130,000          160,000     

General & Administrative                 150,000          150,000

Depreciation                                          40,000              55,000

            EBIT                                                 200,000           275,000

Interest                                                              45,000              55,000

            Earnings Before Taxes                     155,000           220,000

Income Taxes (40% rate)                      62,000             88,000

          Net Income                                         $93,000          $132,000

A. Calculate the cash build, cash burn, and net cash burn or build for Munich Exports in 2016.

B. Assume that 2014 will be a repeat of 2013. If your answer in part A resulted in a net cash burn position, calculate the net cash burn monthly rate and indicate the number of months remaining until "out of cash". If your answer in part A results in a net cash build position, calculate the net cash build monthly rate and indicate the expected cash balance at the end of 2014.

Answer 1

Cash Build = Net Sales – Increase in Receivables = $1,600,000 - ($300,000 - $200,000) = $1,500,000 Cash Burn = Income Statement-Based Operating, Interest and Tax Expenses + Increase in Inventories - (Changes in Payables + Accrued Liabilities) + Capital Expenditures Operating Expenses = Cost of Goods Sold + Marketing + General and Administrative = $960 000 + $160,000 + $150,000 = $1,270,000 Other Cash Expenses = Interest + Taxes = $55,000 + $88.000 = $143.000 Increase in Inventories = ($570,000 - $450,000) = $120,000 Changes in Payables and Accrued Liabilities = [($180,000 - $ 130,000) + ($70 000 - $50,000)] = $70.000 Capital Expenditures or Change in Gross Fixed Assets Change in Net axed Assets plus Depreciation = ($380,000 - $300 000) + $55 000 = $135.000 Cash Burn = $1.270 000 + $143.000 + $120,000 - $70.000 + $135 000 = $1,598,000 | Net Cash Bum=Cash Bum - Cash Build = $1.598.000 - $1.500 000 = $98.000 ($98 000/12 = $8,166 67 Cash balance at end of 2011 = $50.000 $50 000/$8.166 67 = 6. 12 months (remaining "until out of cash)