FACULTY OF BUSINESS MANAGEMENT

BACHELOR OF BUSINESS ADMINISTRATION (HONS)

TRANSPORTATION (BA247)

FIN 420: FINANCIAL MANAGEMENT

INDIVIDUAL ASSINGMENT:

IQBAL HANIF HOLDINGS

FROM: NURAINNA SYUHADA BINTI BAHRI

2021117493

BA2472A

TO: PROFESOR DR JA'AFAR BIN PYEMAN

SUBMISSION DATE:

3 DECEMBER 2021
 TABLE OF CONTENT

No. Content Page No.

1 Introduction 3
2 Question Cash Budget 4
3 Answer for Cash Budget 5
4 Discussion Iqbal Hanif Holdings Cash Budget 6
5  Three Section in Cash Budget 7
 Minimum Cash Balance
 Surplus or Deficit of Cash
 Suggestion
6 Conclusion 8

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INTRODUCTION.

Background of Cash Budgets coins’ finances is usually utilized in estimating whether or not a
corporation has enough coins to fulfill projected coins’ requirements. It is a finances or plan of
anticipated coins’ receipts and disbursements with inside the destiny duration that is carried out via
way of means of growing a precis of expected revenues, sale and buy of property, working expenses,
and admission or agreement of the debt. If coins aren’t enough, the commercial enterprise have to
locate extra investment sources. The coin’s finances have primary elements that are Cash Receipt and
Cash Disbursements. The Cash Receipt segment consists of coins’ sales, bills receivable collections,
and the sale of property at the same time as the Cash Disbursement segment consists of purchases and
different administrative expenses. The end result of a coin’s finances is used with inside the financing
finances which itemizes investments, debt, hobby income, and hobby expense. When there's a huge
coin’s stability with inside the coin’s finances, investments may be made with inside the financing
finances at the same time as whilst there's inadequate stability, the financing finances will imply the
quantity of debt or fairness had to offset them. Prerequisites for a Cash Budget A cash budget is
typically used to assess whether a company has enough cash to meet its projected cash requirements.
A budget or plan for projected cash flows and payments for a future period prepared by making a
summary of expected income, sales and purchases of assets, operating expenses, and debt acceptance
or repayment. When funds are not enough, businesses must find additional sources of funding. The
Cash Budget consists of two main parts: Cash, Receipts, and Cash Disbursements. Section Receipts
contain information about the sale of cash, collection of accounts receivable, and sale of assets, and
Section Cash Withdrawal contains information about purchases and other administrative expenses.
The result of the cash budget is used in the financial budget, which lists investments, liabilities, interest
income, and interest expenses. If the cash budget has a large cash balance, invest in the financial
budget, and if the balance is insufficient, the amount of debt or equity required to compensate for this
is indicated in the financial budget.

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QUESTION CASH BUDGET IQBAL HANIF HOLDINGS.

4
ANSWER CASH BUDGET IQBAL HANIF HOLDINGS.

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DISCUSSION IQBAL HANIF CASH BUDGET

A cash budget shows detailed information about future planned cash flows and consists of four
elements. First, you need cash receipts, cash disbursements, net cash changes, and new funds.

Iqbal Hanif Holdings strives to search for purchases with forecasts of future sales. After a
significant sales effort of units, the company released sales data based on the units that customers have
already ordered with Iqbal Hanif Holdings. Iqbal Hanif Holdings' sales are high season, peaking from
June to August. Iqbal Hanif Holdings knows that 5% of its clients have not paid off their loans. Of
MYR 90,000 sales, is MYR 45,000 and MYR 45,000 is on credit, meaning no cash for at least one
month out of months. 40% of RM40,000 can be received per month (eg RM36,000 in July, 5% in two
months, eg RM4500 in August). 5% bad debt never turns into cash flow. Purchases account for 70%
of sales and are made one month prior to sale. Payments will be made within the next few months. For
example, a sale in August is worth MYR 125,000, so a purchase of in July is 70% X RM125,000 =
MYR 87,500. Salary, Rent, Insurance and Other Cash Expenses are amortized and represent Iqbal
Hanif Holdings' third quarter cash budget, which ends September 2021.

Iqbal Hanif Holdings will pay interest of RM 3500 on RM 100,000 in July. Thus, a company
can identify and admit that although sales may be high, there is a slowdown between sales and cash
receipts. business critical if Iqbal Hanif Holdings requires cash payment to continue trading. Example:
You must settle expenses such as wages, materials, and overhead before receiving cash from a sale If
not managed properly, this can lead to serious liquidity problems.

Iqbal Hanif Holdings now acknowledges that although both sales forecasts are good for in
second quarter and third quarter of this year, companies will have a fairly favorable cash surplus in
August of third quarter of this year and the directors will make a decision. Invest in to maximize your
company's profits. For example, Iqbal Hanif Holdings to purchase illiquid assets during the third
quarter, he will ensure that is payable in August rather than September. In September 2021, the
company experienced a cash deficit of units. Directors of the company can pre-assess the likelihood
of overcoming the deficit. may also apply for a loan to improve the situation. Finally, a cash budget
can be used to determine the cash position of a company. Iqbal Hanif Holdings needs to be more stable
in its financial management.

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DESCRIBE 3 SECTION IN CASH BUDGET.

Cash Receipt

In simple terms, a cash receipt is recognized when a business receives cash from an external
source such as a customer, investor or bank. Typically, this cash is recognized when cash is received
from the customer to offset the receivables outstanding at the time of the sale. Companies can operate
in different ways. Some sell goods and services by credit (pay in cash at a later date), while others
require immediate cash payment when selling goods and services (cash sale). Regardless of the type
of sales transaction, cash is received when a customer provides cash to the company or receives a
check as payment for the goods or services received.

Based on Cash Receipt in Iqbal Hanif Cash Budget, the cash inflow from the month of July till
September it has shown that the amount from July to August increase from RM100,000 to RM125,000.
It shows that the sale in July to August also increasing for the first month and the next month. As for
the month of August till September the cash inflow decrease from RM125,000 to RM105,000 and the
sales are quite slow for the first month in September but start to increase the next month. In the month
of September receive the dividend

Cash Disbursement

Cash disbursement are outflows of cash paid in exchange for the provision of goods or services.
Cash disbursement are also possible, which is recorded as a decrease in sales. Another form of cash
payment is a dividend payment, which is recorded as a decrease in the company's capital. Payment in
cash can be made by invoice, coin, check, or wire transfer. When paying by check, it usually takes
several days for funds to be withdrawn from the company's checking account due to the effects of post-
float and processing floats.

Based on the Iqbal Hanif Cash Budget, it shows that the recorded sales in the month September
is decreasing from RM62,500 to RM52,500 which it decreases as much as RM10,000 in that month.
As for the wages and rent are fixed cost and the cost of operation expenses are 10% from the cash
inflow every month.

Financing Section

Cash flow from financing activities (CFF) measures the flow of funds between a company and
its owners, investors, and creditors. This report shows the net cash flow used to operate the company,
including liabilities, capital and dividends. Cash flow statement financing activities focus on how a

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company raises capital and returns it to investors through the capital markets. These activities include
paying cash dividends, adding or changing credits, or issuing and selling shares.

Iqbal Hanif Holdings received interest from the short term borrowing as much as RM7000
annually, the reasons why company make short term is to meet minimum requirement closing balance
for each month and needed fund for the company to operate every month. And the interest for
semiannually are received on the month of July and December as much as RM3500.

MINIMUM CASH BALANCE.

The minimum cash balance is the cash reserve held to cover unplanned outflows. Without this
safety buffer, the company may not be able to pay the invoice. The use of a minimum cash balance
means that a certain amount of cash is held in your bank account and is not otherwise invested, used
to repay debt, or paid to investors as dividends. The lowest level of cash is most needed in
environments where the timing and size of cash inflows and outflows vary significantly.

The reasons why Iqbal Hanif Holdings set his cash balance as fixed minimum cash balance is
to ensure that the company will have it limit of the money. This is actually a good way to save money
to be spend more. The function of the money to be kept in the cash balance is to always get ready in
case of an emergency happen to the company. At least the company has a backup plan to use the
minimum cash balance.

SURPLUS OR DEFICIT OF CASH.

By the end of the September 2021, it shows that the cash inflow is deficit of cash. When
spending exceeds income, a budget deficit occurs. The term applies to government, but can be a
drawback to individuals, businesses, and other organizations. Since the profit and sales in September
is quite low the source of money is also low but the cash outflow increases which can be the reasons
why the cash flow become deficit by the end of September. Spending money on unexpected costs and
changes can waste cash flow. These changes were usually unexpected and were not included in the
cash flow forecast. In short, the company can't offer them money to pay.

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SUGGESTION TO IQBAL HANIF HOLDINGS IN IMPROVING THE CASH DEFICIT IN
SEPTEMBER.

There are only two ways to reduce a budget deficit: the company need to increase income or
decrease expenditure; first you can keep track on the company budget. Tracking the spending and
incoming sales for every month will save you a finances deficit. This indicator you to capability issues
permitting you to regulate the finances as wished if monetary situations motive your income to be
much less than you predicted. It additionally controls spending prices and indicators you to
overspending, which permits you to switch cash from some other class to cowl the fees or to reduce
spending altogether. If a business enterprise is struggling, growing the frequency of finances reviews
to weekly in place of month-to-month may also assist perceive hassle regions greater quickly.

Plus, the company can start raising the revenue income for the following quarter or the leftover
portion of the year is another way to address a budget shortfall. In case this can be your methodology,
you wish to be reasonable around how much you'll raise the income, and have a specific arrange laying
out how you'll increment deals. The arrange should have quantifiable objectives, and actions that you
just will take in the event that that objective isn't met inside the set time period. This arrange can offer
assistance the whole company work towards to raising the money merely bring in.

References
AMADEO, K. (2020, july 31). Budget Deficits and How to Reduce Them. Retrieved from the balance:
https://www.thebalance.com/budget-deficit-definition-and-how-it-affects-the-economy-3305820

B.MURPHY, C. (2020, AUGUST 9). Cash Flow From Financing Activities – CFF. Retrieved from Investopedia:
https://www.investopedia.com/terms/c/cashflowfromfinancing.asp

Cash disbursement definition. (2021, april 9). Retrieved from Accounting Tools:
https://www.accountingtools.com/articles/2017/5/5/cash-
disbursement#:~:text=A%20cash%20disbursement%20is%20the,a%20reduction%20in%20corporate
%20equity.

Jacob, A. (2018, february 12). The Top 10 Causes of Poor Cash Flow & How To Fix Them. Retrieved from
Ordermentum: https://www.ordermentum.com/blog/the-top-causes-of-poor-cash-flow-and-how-
to-fix-them

Minimum cash balance definition. (2021, April 10). Retrieved from Accounting tools:
https://www.accountingtools.com/articles/2017/5/9/minimum-cash-balance

What are Cash Receipts? (n.d.). Retrieved from My Accounting Course:

https://www.myaccountingcourse.com/accounting-dictionary/cash-receipts