Medieval Adventures Essay

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ACG: 6065 Accounting Foundations Case 11-1 The Medieval Adventures Company Submitted By- Case:11-1 The Medieval Adventures Company 1. The Medieval Adventures Company goes into negative cash in the month of April. This is when the Company needs extra funds. July is the last month which shows a negative cash flow i.e. negative 2500 $.The company needs to raise about 40,000 $ as the ending cash balance for the month of July is negative 40,000 $. The Company can get a short term loan for 40,000 $ which can be repaid in October. 2. Even though the Company started with a Capital of 250,000 $ it still ends up with a zero bank balance. This is because the increase in the collections of Accounts Receivable from customers is not sufficient to recover the total disbursements (variable production cost and the fixed cost). The disbursements are more than the accounts receivable from April onwards. This leads to a negative cash balance in April. This is the reason why the Medieval Company needed money in April. If the company had prepared a Profit Plan which included the cash budget at the beginning of the year itself, then the fact that money will run out by April could have been foreseen. Stricter rules for credit to the customers should have been made so that the customers pay the cash within 5-10 days. Also, they could have asked for credit for supplies instead of giving cash. 3. The cash flow statements for the month

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