The budgeted cash flow statement for a firm projects a cash balance of -$1,600 at the end of the quarter. Key areas of concern are that operating activities are not expected to generate sufficient cash and payments to creditors equal total cash sales. As a result, the firm will not be able to purchase a new $7,000 computer system in July without obtaining additional financing or reducing other expenses. The firm will need to consider options like obtaining a loan, deferring asset purchases or payments, or having the owner contribute capital.

1. 21.5
ANALYSING A BUDGETED
CASH FLOW STATEMENT

2. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 A firm had the following Budgeted
Cash Flow Statement
 Things to consider…
21.5 ANALYSING A BUDGETED
CASH FLOW STATEMENT
Budgeted Cash Flow Statement for the quarter
ended 30 June 2015
$ $
Cash Flows from Operating Activities
Cash sales 10000
Collections from debtors 8000
GST collected 1000
Payments to creditors (10000)
GST paid (600)
Other cash expenses (2000)
Net Cash Flow from Operating Activities 6400
Cash Flows from Investing Activities
Purchase of vehicle (10000)
Net Cash Flow from Investing Activities (10000)
Cash Flows from Financing Activities
Loan – NAB 4000
Drawings (2000)
Loan repayment (1000)
Net Cash Flow from Financing Activities 1000
Net increase (decrease) in cash held (2600)
Cash at beginning of period 1000
Cash at end of period (1600)
What is the firm’s cash position
expected to be at 30 June?
What are the areas of concern for the
firm?
The firm wishes to buy a new computer
system for $7,000 in July. How possible
will this be?
What decisions need to be considered
for the future?

3. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 A firm had the following Budgeted
Cash Flow Statement
 Things to consider…
Budgeted Cash Flow Statement for the quarter
ended 30 June 2015
$ $
Cash Flows from Operating Activities
Cash sales 10000
Collections from debtors 8000
GST collected 1000
Payments to creditors (10000)
GST paid (600)
Other cash expenses (2000)
Net Cash Flow from Operating Activities 6400
Cash Flows from Investing Activities
Purchase of vehicle (10000)
Net Cash Flow from Investing Activities (10000)
Cash Flows from Financing Activities
Loan – NAB 4000
Drawings (2000)
Loan repayment (1000)
Net Cash Flow from Financing Activities 1000
Net increase (decrease) in cash held (2600)
Cash at beginning of period 1000
Cash at end of period (1600)
What is the firm’s cash position
expected to be at 30 June?
• The firm expects to have a bank
overdraft of $1,600
• The firm had $1,000 in the
bank at the end of the current
period
• A poor cash position is
expected.
21.5 ANALYSING A BUDGETED
CASH FLOW STATEMENT

4. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 A firm had the following Budgeted
Cash Flow Statement
 Things to consider…
Budgeted Cash Flow Statement for the quarter
ended 30 June 2015
$ $
Cash Flows from Operating Activities
Cash sales 10000
Collections from debtors 8000
GST collected 1000
Payments to creditors (10000)
GST paid (600)
Other cash expenses (2000)
Net Cash Flow from Operating Activities 6400
Cash Flows from Investing Activities
Purchase of vehicle (10000)
Net Cash Flow from Investing Activities (10000)
Cash Flows from Financing Activities
Loan – NAB 4000
Drawings (2000)
Loan repayment (1000)
Net Cash Flow from Financing Activities 1000
Net increase (decrease) in cash held (2600)
Cash at beginning of period 1000
Cash at end of period (1600)
What are the areas of concern for the
firm?
High payments to
creditors expected –
equal to total cash
sales
Operating Activities
not expected to
generate sufficient
cash from day-to-day
trading
Loan is required to
keep the firm
further out of
overdraft – incurs
interest expenses
Owner planning to
make significant
drawings from the
business given
expected cash
position
21.5 ANALYSING A BUDGETED
CASH FLOW STATEMENT

5. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 A firm had the following Budgeted
Cash Flow Statement
 Things to consider…
Budgeted Cash Flow Statement for the quarter
ended 30 June 2015
$ $
Cash Flows from Operating Activities
Cash sales 10000
Collections from debtors 8000
GST collected 1000
Payments to creditors (10000)
GST paid (600)
Other cash expenses (2000)
Net Cash Flow from Operating Activities 6400
Cash Flows from Investing Activities
Purchase of vehicle (10000)
Net Cash Flow from Investing Activities (10000)
Cash Flows from Financing Activities
Loan – NAB 4000
Drawings (2000)
Loan repayment (1000)
Net Cash Flow from Financing Activities 1000
Net increase (decrease) in cash held (2600)
Cash at beginning of period 1000
Cash at end of period (1600)
The firm wishes to buy a new computer
system for $7,000 in July. How possible
will this be?
This is not possible given the expected
cash position at 30 June.
Operating Activities aren’t expected to
generate enough cash.
Funds will have to come from either:
• Investing Activities – by selling non-
current assets
• Financing Activities – either a loan or
the owner making a capital
contribution
21.5 ANALYSING A BUDGETED
CASH FLOW STATEMENT

6. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 A firm had the following Budgeted
Cash Flow Statement
 Things to consider…
Budgeted Cash Flow Statement for the quarter
ended 30 June 2015
$ $
Cash Flows from Operating Activities
Cash sales 10000
Collections from debtors 8000
GST collected 1000
Payments to creditors (10000)
GST paid (600)
Other cash expenses (2000)
Net Cash Flow from Operating Activities 6400
Cash Flows from Investing Activities
Purchase of vehicle (10000)
Net Cash Flow from Investing Activities (10000)
Cash Flows from Financing Activities
Loan – NAB 4000
Drawings (2000)
Loan repayment (1000)
Net Cash Flow from Financing Activities 1000
Net increase (decrease) in cash held (2600)
Cash at beginning of period 1000
Cash at end of period (1600)
What decisions need to be considered
for the future?
Decisions to plan for…
Contribute capital
Get a loan from a bank
Defer planned asset purchases
Defer payments to creditors
Extend the firm’s overdraft
21.5 ANALYSING A BUDGETED
CASH FLOW STATEMENT

7. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
1.35
1.78 1.81
1.42
1.07
(1.65)
(2.48)
(2.28)
(1.05) (1.07)
0.38
0.51
0.37
(0.95)
0.17
(3.00)
(2.50)
(2.00)
(1.50)
(1.00)
(0.50)
-
0.50
1.00
1.50
2.00
2.50
2009-10 2010-11 2011-12 2012-13 2013-14
Qantas – Net Cash Flows ($b)
Operating
Activities ($b)
Investing
Activities ($b)
Financing
Activities ($b)
21.5 ANALYSING A BUDGETED
CASH FLOW STATEMENT

8. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
ABC Learning:
43.2 89.2
206.9
-454.0
-851.3
-1579.4
456.5
850.1
1495.6
-2,000.0
-1,500.0
-1,000.0
-500.0
-
500.0
1,000.0
1,500.0
2,000.0
2005 2006 2007
ABC Learning – Net Cash Flows ($m)
Operating
Activities ($m)
Investing
Activities ($m)
Financing
Activities ($m)
21.5 ANALYSING A BUDGETED
CASH FLOW STATEMENT

9. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
TASK
In-class Homework
Ex21.5 X
Ex21.6 X