CWK 1 Treasury Management

Q.1.
Companies produce cash budgets in order to ensure that there is enough cash within the business
to achieve the operational levels set by the functional budgets. Kobus Ltd is a newly formed
company that makes sharp ladies’ products. The following are forecasts for the first months.
Item Months
July Aug Sep Oct Nov Dec
Shs 000 Shs 000 Shs 000 Shs 000 Shs 000 Shs 000
Sales 70,000 88,000 90,000 60,000 50,000 64,000
Salaries 40,000 40,000 40,000 40,000 40,000 40,000
Rent 12,000 12,000 12,000 12,000 12,000 12,000
Utilities 8,000 8,000 8,000 8,000 8,000 8,000
Provision for Depreciation 4,000 4,000 4,000 4,000 4,000 4,000
Loan Received - 80,000 - - 60,000 -
Loan Repaid - - 60,000 20,000 - 15,000
Figures above are based on orders that customers have already placed with the company.
However, in order to secure the orders, the sales team negotiate payment terms with the
customers. 20% of customers agreed to pay immediately. Of the remaining customers, 60%
agreed to pay after one month and 40% after two months. 2% of credit customers may not pay.
These may become bad debtors. 40% of the purchases are cash purchases. Of the credit
purchases, 40% are be paid a month after the date of purchase, the remaining creditors will be
paid two months after the month of purchase. Salaries, rent and utilities will be paid for in the
month it will be incurred. The bank balance at 1.07.2024 is expected to be UGX 120,000,000.
Required
i. Describe the budget process of Uganda Government in FY2024/25
ii. Describe the purpose of cash budgets in Victoria University
iii. Prepare a four-month cash budget for the months of July to October 2024.
Q.2.
The most common types of derivatives are swaps, forwards, futures, and options.
For each of these derivatives describe the to the manager GFR Ltd a memo:
i. Characteristics
ii. Benefits
iii. Limitations
iv. Application
Q.3.
a) Explain the concept of Interest Rate Parity as applied in Ugandan economy in June 2024.
b) Distinguish between locational and triangular arbitrage in treasury management of Pasay
Ltd an international company registered in Uganda.
c) A company had at its disposal UGX 160,000,000 $ spot rate 90 days forward rate UGX
3,720. UGX 90 – day interest rate is 4%; while $ 90 – day interest rate is 6%.
Determine the yield earned on arbitrage.