Can you please help me to find solution to question 2 Question 2Hanns. G owns a chain of 12 shops selling PC equipment. At the beginning of May, the businesshad an overdraft of £22,000 and the bank had asked for this to be eliminated by the end of October.As a result, the directors have recently decided to review their plans for the next six months.The following plans were prepared for the business some months earlier:MayJune July Aug Sept Oct£000£000£000 £000£000£000230 220 250220 21018016020314019525232422769620112Sales incomePurchases of stockAdministration expensesSelling expensesTaxation paymentInterest paymentsShop refurbishment.200205256-1stock level of £50,000.3. The gross profit margin is 30%.268Required:11111024020024811Nov£000Notes:1. The stock level at May 1 was £105,0002. Suppliers of stock allow one month's credit. The business seeks to maintain a minimum14. All sales proceeds are received in the month of sale. However, 30% of customers pay witha credit card. The credit card business pays Hanns G in the month of sale. The chargethe credit carmade by the credit card business to Hanns G is 3% of the sales income value. Thesecharges are in addition to the selling expenses identified above. The business has a bankmaddloan, which it is paying off in monthly instalments of £5,000. The interest element represents20% of each instalment.5. Administration expenses are paid when incurred. This includes a monthly charge of £7,000in respect of depreciation.6. Selling expenses are payable in the following month.(a) Prepare the following:i. a stock budget and a cash budget for the six months to 31 October which shows thecash balance at the end of each month; andii. a budgeted Profit & Loss Account for the whole of the six-month period ending 31October (i.e. a monthly breakdown of profit is not required).(b) Explain the problems your calculations indicate that 'Neural Ltd' is likely to face in thenext six months, and how management actions could address these problems.(c) Critically discuss the conditions which should be present within an organisation for asystem of budgeting and budgetary control to be successful, and briefly discuss fourpoints related to the behaviours of people which management needs to take intoconsideration when such a system is introduced.

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Business

Accounting

Can you please help me to find solution to question 2

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter6: Managing Cash Flow

Section: Chapter Questions

Problem 13SEP

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