Question

The financial analyst at Medupe Company has prepared the following sales and cash disbursement estimates (in thousand rand) for the period February to June of the current year

	February	March	April	May	June
Sale	5000	6000	4000	2000	2000
Cash disbursement	4000	4000	6000	5000	3000

Historically Medupe Company has had 30% of sales being for cash. Of the credit sales, 70% are collected one month after the sale, and the remaining 30% are collected two months after the sale. The company has access to a R20 000 revolving line of credit at a cost of 12% interest per year, assuming 365-day year. No administrative fees are applicable.

All purchases and other disbursements are procured on a cash basis. The depreciation for the year is estimated at R1 500 The beginning cash balance at April 1 is R1 500.

Required
Draw up a cash budget for Medupe Company for April, May and June and determine how much the requisite short-term financing by way of revolving line of credit will cost, if utilised.

	February	March	April	May	June
Opening balance
Cash sales (30%)
Credit sales (70%)
February
March
April
May
June
Total credit sales
Cash disbursement
Cash in/(out) flow
Financing costs
Total financing cost

Answer 1

	APRIL	MAY	JUNE
SALE	4000	2000	2000
DISBURSEMENT	6000	5000	3000
Opening balance	1500	690	-490
Cash sales (30%)	1200	600	600
Credit sales (70%)	2800	1400	1400
Cash Inflow
- cash sales	1200	600	600
- Cash received in one month	2940	1960	2450
- Cash received in two month	1050	1260	840
Total Cash in hand	6690	4510	3400
Cash disbursement	6000	5000	3000
Cash in/(out) flow	690	-490	400
Financing costs	0	4.99	0
Total financing cost	0	4.99	0