Cash Budget Analysis Project Overview

This project involved an in-depth financial analysis of Med-I-Mark Tech Ltd. to assess its cash flow, operational efficiency, and financial decision-making. The main objective was to analyze the company’s cash budget and propose recommendations to enhance financial health and long-term sustainability.

Key areas of focus included evaluating sales growth, cash collections, purchasing strategies, and key operational expenses. Additionally, strategic financial decisions were explored, such as the timing of equipment purchases, quarterly bonus payments, and the impact of interest rate changes.

Key Questions Addressed:

1. Should the company pay optional quarterly bonuses, and what is the financial impact of doing so?

2. When is the most optimal time to invest in additional equipment for maximizing financial benefits?

3. How does the company’s overall cash flow look in terms of liquidity, and are there any opportunities for improving cost management?

Methodology:

1. Inputting and organizing scenario-based data to construct the cash budget template.

2. Conducting analysis on core financial operations, including the evaluation of sales, purchases, and wage payments, to determine cash flow projections.

3. Reviewing bonus payment options and the timing of capital investments based on profitability and the company’s financial obligations.

4. Identifying potential risks related to interest rate fluctuations and making adjustments to the budget to account for these variables.

Key Takeaways:

1. Strategic Timing for Equipment Purchase: Delaying the equipment purchase to the end of the fiscal year helped the company prioritize debt repayment and reduce interest costs.

2. Bonus Payment Decision: The analysis recommended paying the second-quarter bonus to boost employee morale but withholding the third-quarter bonus to maintain financial stability.

3. Dependence on Non-Core Revenues: The company’s reliance on license revenues and vendor credits posed a risk to long-term profitability, highlighting the need to improve core operations and reduce dependency on non-recurring income.

4. Cost Management Opportunities: By optimizing wages and marketing expenses, the company could improve its operational margins, freeing up resources for growth.

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This project underscored the importance of robust financial planning and strategic decision-making in managing both short-term liquidity and long-term growth.