Accounting and Financial Management - Yamada Company Ltd - Case Study Example

Accounting and Financial Management By Name Course Tutor University City, State Date Accounting and Financial Management Introduction This involves computing the Yamada’s cash flow for six months by looking at how it is affected by its credit policies. The cash flow within a business in critical because it affects its operational ability and the way it competes with others in the future (Yamada, 2016). It is important for the business to have sufficient cash flows and at the same time serve its clients demands well. You are required to prepare a report to the manager of Yamada Company showing the following: Collection experience 45% collected on the month of sale 25% collected in the following month 20% are collected two months after sales And 10% are uncollectable. (a) The effect on the cash flows for the period from 1st January to 30th June Given the following information and instructions as above November (Actual) $180,000 December (Actual) $215,000 January $85,000 February $65,000 March $225,000 April $200,000 May $115,000 June $185,000 Cash Collection Budget January February March April May June Mid Year Accounts Receivables 31 December (20%*$180,000)+(25%*$215,000) $89,750 $89,750 (20%*$215,000) $43,000 $43,000 Accounts Receivables (January Sales) 55%*$85,000 $46,750 $46,750 25%*$85,000 $21,250 $21,250 10%*$85,000 $8,500 $8,500 Accounts Receivables (February Sales) 55%*$65,000 $35,750 $35,750 25%*$65,000 $16,250 $16,250 10%*$65,000 $6,500 $6,500 Accounts Receivables (March Sales) 55%*$225,000 $123,750 $123,750 25%*$225,000 $56,250 $56,250 10%*$225,000 $22,500 $22,500 Accounts Receivables (April Sales) 55%*$200,000 $110,000 $110,000 25%*$200,000 $50,000 $50,000 10%*$200,000 $20,000 $20,000 Accounts Receivables (May Sales) 55%*$115,000 $63,250 $63,250 25%*$115,000 $28,750 $28,750 Accounts Receivables (June Sales) 55%*$185,000 $101,750 $101,750 Total cash collections $136,500 $100,000 $148,500 $172,750 $135,750 $150,500 $844,000 Cash Payments Budget January February March April May June Mid Year in $ in $ in $ in $ Account payable 31 Dec 25,000 25,000 January Purchases (50%*80,000) 40,000 40,000 (50%*80,000) 40,000 40,000 March Purchases (50%*220,000) 110,000 110,000 (50%*220,000) 110,000 110,000 May Purchases 0 (50%*140,000) 70,000 70,000 (50%*140,000) 70,000 70,000 Monthly salaries 45,000 45,000 45,000 45,000 45,000 45,000 270,000 Depreciation 5,000 5,000 5,000 5,000 5,000 5,000 30,000 Selling and administrative expense 20,000 20,000 20,000 20,000 20,000 20,000 120,000 Bank interest 3,958 3,958 3,958 3,958 3,958 3,958 23,750 Total Cash Payments 138,958 113958.333 183,958 183,958 143,958 143,958 908,750 (b) The total amount to be collected from the customers (Account Receivables) as at 30 June 2016. The total amount to be collected from the customers (Account Receivables) as at 30 June 2016 $150,500 (c) Net profit before tax for the period from January to June, assuming that there was no beginning inventory and the ending inventories amounts to $40,000. Ignore tax. Net profit before tax for the period from January to June, assuming that there was no beginning inventory and the ending inventories amounts -24,750 (d) The steps the manager could take to ensure that the cash balance of the store remains positive and the ways in which budgeting may assist the company. Negotiating for credit purchases Ensuring that the business sales its stocks on cash basis. The business should be able to collect its credit sales within the shortest time possible Borrowing from lower interest rates institutions. Not storing excess inventory or raw materials not needed in the near future Recommendations The sales managers together with the entire sales force within the Yamada’s should be more aggressive to reach more customers. This may be realized by extending the company’s marketing scenario to include more customers. This implies increased chances of realizing more sales as opposed to serving decreasing customers’ population. Yamada Company may result to going international if it demands so, in order to increase its sales revenues by increasing the number of clients to serve. This is because increased clients base may mean increased diversification as measured by the customers the company is able to serve and at the same time reducing instances of increased competitions. Conclusion Yamada Company Ltd can also reduce the unnecessary sales cost associated. This may include reducing the number of sales staffs, advertisement cost, distribution cost and rental costs of they are not leading to increased productivity. By putting in place such measures, it implies that it can now focuses on core cost and at the same time become more efficient. A more efficient company will achieve higher ratio of input to output as there will be less wastage as a result of unutilized inputs. References Yamada(2016). Product Information Yamada Manufacturing Co., Ltd .Retrieved from http://www.yamada-s.co.jp/english/company/ Read More