importance of Budgeting in the Business world

Question 1
Financial Planning is paramount for the success of any organization. Discuss the merits of
this Statement.
Question 2
What is the importance of Budgeting in the Business world? Discuss the merits and
demerits. Also, elaborate on the Budget cycle that an organization needs to follow.
Question 3
If you plan to invest $15,000 annually for 5 years and the discount rate is 15%.
Required: i) Calculate what is the future value ?
ii) Briefly explain the time value of money.
Question 4
Prepare a Cash budget for the Quarter April To June based on the following data and
additional information.
Month Sales($) Purchase($) Wages($) Overheads($)
Jan 70,000 38,000 7,000 12,000
Feb 52,000 40,000 8,000 5,500
Mar 59,000 42,000 10,000 13,500
Apr 63,000 44,000 11,500 7,400
May 56,000 46,000 9,000 9,500
Jun 65,000 48,000 8,000 9,000
Additional Information :
1. Cash balance at 1st April is $720,000
2. Sales is 30% cash sales and 70% is collected in the following month.
3. All purchases of a month are paid after 2 months.
4. Land was purchased in April for $105,000
5. Wages of a month are paid the following month. All overheads are paid the same
month.
6. Loan repaid in May $56,000
Question 5
Kwality Industries is considering two projects to develop. The expected cash inflows are as
follows :
Project A Project B
Year 1 140,000 130,000
Year 2 175,000 250,000
Year 3 135,000 320,000
Year 4 250,000 50,000
Year 5 200,000 170,000
Each Project requires an investment of $750,000. A rate of 10% has been selected for the
Net Present Value (NPV) Analysis.
Required :
Calculate through the NPV and the Payback method and suggest which project should be
recommended based on each method.
Question 6
Explain in detail the Performance Management cycle with suitable examples.
Question 7
a) What is the importance of Break Even Analysis ?
b) Banana Republic Company, a producer of specialty cards, wants you to complete several
calculations based on the information given :
Selling Price/Unit = $9.50
Variable Cost/Unit = $5.50
Total Fixed Costs = $45,500
Required to calculate the following :
i) Break Even point in units
ii) Sales Volume necessary to produce a net income of $25,500
iii) Total Units required to be sold to earn a Net Income of $32,480