WHITE CELLS ARE ADJUSTABLE

Kristoffer Burnett - Certified Management Accountant, 2009-2011

Financial Budget Example

Pro Forma Balance Sheet
Assumed depreciation:

361,250
As of beginning of budget period

Cash
$
Short-term investments
Accounts receivable
Raw materials inventory
Finished goods inventory
Total current assets

655,379
1,504,291
88,203
324,202
2,572,076

Land
Property, plant, and equipment
Total long-term assets

558,591
2,015,848
2,574,439

Total assets $

Accounts payable
Accrued expenses
Notes payable
Total current liabilities

5,146,515

As of end of budget period

$

Beginning/Ending cash balance from the Cash Budget

Sum of Net investments from the Cash Budget and accumulated investment income
Sales amounts from the Cash Collections Schedule - amounts already collected
Inventory quantities and costs from the Direct Materials Budget (Operating Budget Example)
Inventory quantities and costs from the Production Budget & Ending FG Inventory Budget (Operating Budget Example

558,591 Displayed to demonstrate its effect on the balance sheet

2,064,598
1
2,623,189
$

252,965
182,407
52,891
488,263

Long-term liabilities

980,096
77,908
1,576,317
105,755
341,381
3,081,457

5,704,646

255,838 Direct material purchases from the Cash Disbursements Schedule - the amounts already paid
190,574 Direct labor/overhead accrued from Cash Disbursements Schedule - the amounts already paid
1,789 Includes initial short-term borrowings and any that incurred throughout the budget period as shown on the Cash Budget
448,202

Total liabilities $

712,645
1,200,908

438,207 Includes initial long-term borrowings and any that occurred throughout the budget period as shown on the Cash Budget
886,409

Total equity $

3,945,606

4,818,237 Total assets - Total liabilities

Total liabilities and equity $

5,146,515

5,704,646 Must equal Total assets

Pro Forma Cash Flow Statement

Operating cash flow
Cash collected from customers
Cash paid to employees and suppliers
Interest paid
Income taxes paid
Cash from operating activities

15,889,765
(14,092,912)
(30,942)
(630,824)
1,135,087

Sum of Total cash collections from sales from the Cash Collections Schedule
Sum of Total cash payments for DM/DL/OH/op expenses from the Cash Disbursements Schedule
Total interest paid on short and long-term borrowings
Sum of Cash payments for estimated tax from the Cash Budget

Investing cash flow

Net investments
Purchase/sale of plant assets
Cash from investing activities

(74,830) Total Deposits and Withdrawals from the Cash Budget

(410,000) Cash payments for equip purchases from the Cash Budget. For simplicities sake, no equipment sales were assumed to take place
(484,830)

Financing cash flow

Short-term debt
Long-term debt
Cash from financing activities

Net change in cash

(51,101) Difference between end and beginning Notes payable from the Pro Forma Balance Sheet
(274,438) Difference between end and beginning Long-term liabilities from the Pro Forma Balance Sheet
(325,540)
324,717 Sum of cash from operating, investing and financing activities

Pro Forma Income Statement

Tax rate (%):
Net sales
Cost of goods sold
Gross profit

35.0%
$

Operating expenses
Operating profit (EBIT)

(2,827,586) From the SG&A Budget

1,851,862 Gross profit - Operating expenses

Interest income
Interest expense
Tax
Net profit

15,946,821 From the Sales Budget

(11,267,373) From the Cost Of Goods Sold Budget
4,679,448 Net sales - Cost of goods sold

951 From interest bearing investments

(44,083) From short and long-term borrowings used to finance operations
(633,056) Based on the percentage entered above
$

1,175,675 Amount available after all expenses have been paid

2,083,813 The excess of Total current assets over Total current liabilities

Ratios
Current ratio
Working capital
Receivables turnover

5.3 Total current assets / Total current liabilities. This demonstrates the firm's ability to pay its current liabilities

7.8 Net credit sales / average Accounts receivable. This demonstrates the firm's ability to manage accounts receivable

Days sales outstanding

46.6 365 (days in the year) / Receivables turnover

Days purchases unpaid

18.1 End of year Accounts payable / average daily purchases. This demonstrates the firm's ability to settle its accounts payable in a timely manner.

Inventory turnover

26.2 Cost of goods sold / average inventory. This demonstrates the firm's ability to manage inventory levels

Days inventory on hand

13.9 365 (days in the year) / Inventory turnover

Operating cycle

60.5 Days inventory on hand + Days sales outstanding. This demonstrates the amount of time it takes to convert resources into cash

Debt to assets

23.3% Total liabilities / Total assets. This is the percentage of assets financed by borrowed funds

Debt to equity

30.4% Total liabilities / Total equity. This is simply a comparison between the two methods of financing

Return on equity

26.8% Net profit / Total equity.

Return on assets

21.7% Net profit / Total assets.

Asset turnover
Operating cash flow to income

$1,500,000

2.9 Net sales / average Total assets. This demonstrates how effectively assets were used to generate sales
0.97 Cash from operating activities / Net profit. This demonstrates the difference between net profit and actual cash received

Cash Collections, Disbursements and Balances

$1,000,000

$500,000

$0

Total cash

$0

-$500,000

-$1,000,000

-$1,500,000

-$2,000,000

Notes:
1 The end of period amount includes the addition of Total cash payments for equip purchases from the Cash Disbursements Schedule- Assumed depreciation.

Total cash
disbursements
Total cash
collections
Ending cash
balance

WHITE CELLS ARE ADJUSTABLE

Kristoffer Burnett - Certified Management Accountant, 2009-2011

Financial Budget Example

Cash Collection Schedule
% collection of current month sales:
% collection of prior month sales:
% collection of 2nd prior month sales:
% uncollectable sales:
Total:

Default data taken from Operating Budget Example where applicable

30.0%
40.0%
22.5%
7.5%
100%
1

Oct-2010
Projected sales
$ 1,390,770
Cash collections from sales
From current month sales
417,231
From prior month sales
From 2nd prior month sales
Total cash collections from sales

Nov-2010
$ 1,396,353

Dec-2010
$ 1,401,539

Jan-2011
$ 1,406,603

Feb-2011
$ 1,411,609

Mar-2011
$ 1,416,734

Apr-2011
$ 1,421,960

May-2011
$ 1,427,757

Jun-2011
$ 1,433,212

Jul-2011
$ 1,438,658

Aug-2011
$ 1,444,503

Sep-2011
$ 1,450,518

Oct-2011
$ 1,456,576

Nov-2011
$ 1,462,751

Dec-2011
$ 1,468,926 Gross Sales from the Sales Budget (Operating Budget Example)

418,906
556,308

420,462
558,541
312,923

421,981
560,616
314,179
$ 1,296,776

423,483
562,641
315,346
$ 1,301,470

425,020
564,644
316,486
$ 1,306,149

426,588
566,694
317,612
$ 1,310,894

428,327
568,784
318,765
$ 1,315,876

429,964
571,103
319,941
$ 1,321,007

431,597
573,285
321,245
$ 1,326,128

433,351
575,463
322,473
$ 1,331,287

435,155
577,801
323,698
$ 1,336,655

436,973
580,207
325,013
$ 1,342,193

438,825
582,630
326,367
$ 1,347,822

440,678 % collection of current month sales * Projected sales

585,100 % collection of prior month sales * Projected sales
327,730 % collection of 2nd prior month sales * Projected sales
$ 1,353,508

Notes:
1 Three previous periods included to calculate first period's cash collections.

WHITE CELLS ARE ADJUSTABLE

Kristoffer Burnett - Certified Management Accountant, 2009 -2011

Financial Budget Example

Cash Disbursements Schedule
Dec-2010

Jan-2011

Feb-2011

Mar-2011

Apr-2011

May-2011

Jun-2011

Jul-2011

Aug-2011

Sep-2011

Oct-2011

Nov-2011

Dec-2011

$ 423,216
169,286
252,965
$ 422,251

$ 424,546
169,818
253,929
$ 423,748

$ 426,061
170,424
254,728
$ 425,152

$ 427,734
171,094
255,636
$ 426,730

$ 429,457
171,783
256,641
$ 428,423

$ 430,790
172,316
257,674
$ 429,990

$ 432,600
173,040
258,474
$ 431,514

$ 434,260
173,704
259,560
$ 433,264

$ 435,986
174,394
260,556
$ 434,951

$ 437,697
175,079
261,592
$ 436,670

$ 439,525
175,810
262,618
$ 438,428

$ 426,397 Grand Total from the Direct Materials Budget (Operating Budget Example)
170,559 % payment of current month DM purchases * Direct material purchases
263,715 % payment of prior month DM purchases * Direct material purchases
$ 434,274

$ 264,031
198,023
65,678
$ 263,701

$ 265,041
198,781
66,008
$ 264,789

$ 266,310
199,733
66,260
$ 265,993

$ 267,492
200,619
66,578
$ 267,197

$ 268,870
201,653
66,873
$ 268,526

$ 269,929
202,447
67,218
$ 269,664

$ 271,360
203,520
67,482
$ 271,002

$ 272,634
204,476
67,840
$ 272,315

$ 274,024
205,518
68,159
$ 273,677

$ 275,330
206,498
68,506
$ 275,004

$ 276,816
207,612
68,833
$ 276,445

$ 278,230 Grand total from the Direct Labor Budget (Operating Budget Example)
208,672 % payment of current month DL accrual * Direct labor accrued
69,204 % payment of prior month DL accrual * Direct labor accrued
$ 277,876

$ 234,632
117,316
116,730
$ 234,046

$ 235,151
117,575
117,316
$ 234,892

$ 235,808
117,904
117,575
$ 235,479

$ 236,425
118,212
117,904
$ 236,116

$ 237,134
118,567
118,212
$ 236,780

$ 237,688
118,844
118,567
$ 237,411

$ 238,433
119,216
118,844
$ 238,060

$ 239,102
119,551
119,216
$ 238,768

$ 239,826
119,913
119,551
$ 239,464

$ 240,511
120,255
119,913
$ 240,168

$ 241,287
120,643
120,255
$ 240,899

$ 242,033 Grand total from the Overhead Budget (Operating Budget Example)
121,017 % payment of current month OH accrual * Overhead accrued
120,643 % payment of prior month OH accrual * Overhead accrued
$ 241,660

$ 240,151

$ 216,911

$ 240,151

$ 232,404

$ 240,151

$ 232,404

$ 240,151

$ 240,151

$ 232,404

$ 240,151

$ 232,404

$ 240,151 Total from the SG&A Budget (Operating Budget Example)

$ 120,000

$ 200,000

90,000

$ 155,005

$ 156,727

$ 158,565

$ 1,441,780

$ 1,162,447

$ 1,326,197

$ 1,380,727

$ 1,339,060

$ 1,191,993

DIRECT MATERIALS
% payment of current month DM purchases:
% payment of prior month DM purchases:
Direct material purchases:
Cash payments for current month purchases
Cash payments for prior month purchases
Total cash payments for DM

40.0%
60.0%
$ 421,608

DIRECT LABOR
% payment of current month DL accrual:
% payment of prior month DL accrual:
Direct labor accrued:
Cash payments for current month DL accrued
Cash payments for prior month DL accrued
Total cash payments for DL

75.0%
25.0%
$ 262,711

OVERHEAD
% payment of current month OH accrual:
% payment of prior month OH accrual:
Overhead accrued:
For current month overhead accrued
For prior month overhead accrued
Total cash payments for OH

50.0%
50.0%
$ 233,459

OPERATING EXPENSES
Total cash payments for op expenses

EQUIPMENT PURCHASES
Total cash payments for equip purchases

This information would be initially calculated in the capital budget.

INCOME TAXES
Estimated tax % of net sales

3.970%

Total cash payments for estimated tax

Grand total

$ 1,160,149

$ 1,140,339

$ 1,173,880

$ 1,184,498

$ 1,278,176

$ 160,528 Assumes quarterly payments based on the percentage entered above * Total cash collections from sales from the Cash Collections Schedule

$ 1,354,489

WHITE CELLS ARE ADJUSTABLE

Kristoffer Burnett - Certified Management Accountant, 2009-2011

Financial Budget Example

Sample Cash Budget

Beginning cash balance

Jan-2011

Feb-2011

Mar-2011

Apr-2011

May-2011

Jun-2011

Jul-2011

Aug-2011

Sep-2011

Oct-2011

Nov-2011

$ 655,379

$ 680,000

$ 705,000

$ 730,025

$ 755,000

$ 780,000

$ 805,864

$ 830,317

$ 855,000

$ 880,648

$ 905,000

1,296,776

1,301,470

1,306,149

1,310,894

1,315,876

1,321,007

1,326,128

1,331,287

1,336,655

1,342,193

1,347,822

(422,251)
(263,701)
(234,046)
(240,151)
(1,160,149)

(423,748)
(264,789)
(234,892)
(216,911)
(1,140,339)

(425,152)
(265,993)
(235,479)
(240,151)
(120,000)
(155,005)
(1,441,780)

(426,730)
(267,197)
(236,116)
(232,404)
(1,162,447)

(428,423)
(268,526)
(236,780)
(240,151)
(1,173,880)

(429,990)
(269,664)
(237,411)
(232,404)
(156,727)
(1,326,197)

(431,514)
(271,002)
(238,060)
(240,151)
(200,000)
(1,380,727)

(433,264)
(272,315)
(238,768)
(240,151)
(1,184,498)

(434,951)
(273,677)
(239,464)
(232,404)
(158,565)
(1,339,060)

(436,670)
(275,004)
(240,168)
(240,151)
(1,191,993)

(5,189)
774,811
805,000
(30,189)

(54,600)
751,264
830,000
(78,736)

Dec-2011

Jan-2012

$ 930,000 With the exception of the first period, all amounts are equal to the "Ending cash balance" from the previous period

CASH COLLECTIONS
Cash collections from sales

1,353,508 "Total cash collections from sales" from "Cash Collections Schedule"

CASH DISBURSEMENTS
Cash payments for DM
Cash payments for DL
Cash payments for OH
Cash payments for op expenses
Cash payments for equip purchases
Cash payments for estimated tax
Total cash disbursements
Surplus(deficit) of collections over disbursements
Trial ending cash balance
Desired ending cash balance
Excess(shortfall) of cash to desired balance

136,627
792,006
680,000
112,006

161,131
841,131
705,000
136,131

(135,630)
569,370
730,000
(160,630)

148,446
878,472
755,000
123,472

141,997
896,997
780,000
116,997

146,789
977,106
855,000
122,106

(2,406)
852,594
880,000
(27,406)

150,200
1,030,847
905,000
125,847

(438,428)
(434,274)
(276,445)
(277,876)
(240,899)
(241,660)
(232,404)
(240,151)
(90,000)
(160,528)
(1,278,176) (1,354,489)
69,646
974,646
930,000
44,646

Total cash payments

Total cash payments
Total cash payments
Total cash payments
Total cash payments
Total cash payments

for DM from the Cash Disbursements Schedule

for DL from the Cash Disbursements Schedule
for OH from the Cash Disbursements Schedule
for op expenses from the Cash Disbursements Schedule
for equip purchases from the Cash Disbursements Schedule
for estimated tax from the Cash Disbursements Schedule

(982) Cash collections from sales - Total cash disbursements

929,018 Beginning cash balance + Surplus(deficit) of collections over disbursements
980,000
(50,982) Trial ending cash balance - Desired ending cash balance

SHORT-TERM FINANCING
Interest rate for borrowed funds
Term (in months) for borrowed funds
Original amount borrowed
Original date obtained
Additional borrowings
Repayments
Net short-term financing

6.0%
12
70,000
9/1/2010
(6,025)
(6,025)

(6,025)
(6,025)

7,000
(6,025)
975

(6,627)
(6,627)

(6,627)
(6,627)

(6,627)
(6,627)

(6,627)
(6,627)

(6,627)
(6,627)

(6,627)
(6,627)

(602)
(602)

(602)
(602)

(25,320)
(25,320)

(25,320)
(25,320)

(25,320)
(25,320)

(25,320)
(25,320)

(25,320)
(25,320)

(25,320)
(25,320)

(25,320)
(25,320)

(25,320)
(25,320)

(25,320)
(25,320)

185,000
185,000

(91,525)
(91,525)

(85,050)
(85,050)

63,000
63,000

111,000
111,000

(90,159)
(90,159)

60,000
60,000

(99,925)
(99,925)

(18,724)
(18,724)

$ 805,864

$ 830,317

Amount needed to cover shortfall of cash that is not available in investments

(602) Repayment of borrowings based on the information entered above
(602) Additional borrowings - Repayments

LONG-TERM FINANCING
Interest rate for borrowed funds
Term (in years) for borrowed funds
Original amount borrowed
Original date obtained
Additional borrowings
Repayments
Net long-term financing

5.0%
8
2,000,000
6/1/2005
(25,320)
(25,320)

INVESTMENTS
Income rate for invested funds
Deposits
Withdrawals
Net investments

Ending cash balance

(25,320)
(25,320)

(25,320) Repayment of borrowings based on the information entered above

(25,320) Additional borrowings - Repayments

3.0%
(80,662)
(80,662)

$ 680,000

(104,787)
(104,787)

$ 705,000

$ 730,025

$ 755,000

$ 780,000

Notes:
1 Investments are shown as decreases to the cash account(s). Though, cash is not technically leaving the organization.
ALSO it is assumed
that dividends and interest earned will be reinvested at the stated rate.
2 These fields will outline any borrowings that existed prior to the beginning of the budget period and any obtained throughout the budget period.

$ 855,000

$ 880,648

$ 905,000

$ 930,000

Excess of cash to desired balance moved to investment accounts, if applicable

77,000 Amount needed to cover shortfall of cash to desired balance. Not to exceed period-to-date total of Deposits
77,000 Withdrawals + Investment income - Deposits

$ 980,096