12-ABM

PERFORMANCE TASK

1.
1. 90+60=150 days
2. 90+60-30=120 days
3. Reduce the time it takes to sell goods, collect accounts receivable, and extend the time it
takes to pay suppliers without negatively impacting the relationship.

2.

Forecaste
d sales 100,000 200,000 400,000 300,000 200,000
August September October November December
Cash Sales P20,000 P40,000 P80,000 P60,000 P40,000
(20%)
Collection
of AR
1st month P50,000 P100,00 P200,000 P150,000
(50%) 0
2nd month P30,000 P60,000 P120,000
(30%)
Other cash P30,000
receipts
TOTAL P210,00 P320,00 P340,000
CASH 0
RECEIPTS

3. The three ways for Maria to better manage her cash balance:

1. Invest any remaining funds. Maria can convert her current savings account balances into a Time
Deposit, boosting her interest rate from 1.5 percent to around 4.2 percent. She will improve her annual
interest earnings by roughly PHP2,295 (0.042 - 0.015) X P85,000 on her present P17,000 amount.

2. Invest your monthly profits. Maria can send PHP3,000 from her checking account to the Time Deposit
on a monthly basis, boosting the yearly earnings on each monthly transfer by roughly PHP81(0.042 -
0.015) X PHP3,000, resulting in additional annual earnings of about PHP972 for the 12 transfers (12
months X PHP81).
3. Payments should be deferred. Maria can pay her invoices closer to their due date rather than
immediately upon receipt. On an average of PHP9,500 in bills, she can obtain 10 days of disbursement
float per month, or 120 days per year (10 days per month over 12 months). Slowing down her payments
would save her roughly P133 per year (120/360) X 0.042 X P9,500, assuming she can earn 4.2 percent
annual interest on the PHP9,500. Maria's annual earnings would grow by around PHP3,400 (PHP2,295 +
PHP972 + PHP133) if she followed these three recommendations. Maria can clearly increase her
earnings by better controlling her financial flow.

WRITTEN WORKS

1. It is perfectly normal to fall short of high expectations presented in the first quarter. It is
important to make corrections and move forward in positive direction. Management
and employees should be able encourage to offer suggestions for improvement and
possible new methods to reach the company goals or whatever goals.

2.
 Cash is legal tender—currency or coins—that can be used to exchange goods,
debt, or services. Sometimes it also includes the value of assets that can be
easily converted into cash immediately, as reported by a company.
 Inventory is the accounting of items, component parts and raw materials that a
company either uses in production or sells. As a business leader, you
practice inventory management in order to ensure that you have enough stock
on hand and to identify when there’s a shortage.
 The operating cycle is the average period of time required for a business to
make an initial outlay of cash to produce goods, sell the goods, and receive cash
from customers in exchange for the goods.
 Accounts receivable (AR) is the balance of money due to a firm for goods or
services delivered or used but not yet paid for by customers. Accounts
receivables are listed on the balance sheet as a current asset. AR is any amount
of money owed by customers for purchases made on credit.

3. The working capital policy of a company refers to the level of investment in current
assets for attaining their targeted sales. It can be of three types: restricted, relaxed, and
moderate. The relaxed policy has higher and restricted has lower levels of current
assets, whereas moderate places itself between relaxed and restricted. Commonly,
these policies are also named aggressive, conservative, and hedging policies.
SUMMATIVE TEST

A.
1. d
2. b
3. a
4. c
5. D

B.

A Cash Budget for Best Valu Supermarkets

September October November December

Cash receipts
Sales (cash $450 $450 $450 $630
90%)
Sales
Collected (1 40 50 50 60
mo. Lag 10%)
Total cash $490 $500 $590 $690
receipts
Total cash 500 700 400 500
disbursements
Net cash flow (10) (200) 190 190
Beg. cash 25 15 (185) 5
balance
Ending cash 15 (185) 5 195
balance
Minimum 50 50 50 50
balance
Required 35 235 45
financing
Express Cash 45

During the four-month term, Best Valu Supermarkets shall arrange for a credit line of at least $235.