Accounts and finance

Table of Contents

1. Topic pack - Accounts and finance - introduction
2. 3.1 Sources of finance - notes
3. 3.1 Sources of finance - questions
4. 3.2 Investment appraisal - notes
5. Investment appraisal
6. 3.2 Investment appraisal - questions
7. 3.3 Working capital - notes
8. 3.3 Working capital - questions
   1. Working capital - short exercises
   2. Cash flow forecasts - case study - cash flow management
   3. Cash flow forecasts - short answer questions
   4. Cash flow forecasts - numerical questions
   5. Case study (1) - profit and cash flow
   6. Case study (1) - profit and cash flow
   7. Case study (2) - profit and cash flow
   8. Awash with cash
   9. Awash with debt
9. 3.4 Budgeting - notes (HL only)
10. 3.4 Budgeting - questions
11. 3.5 Final accounts - notes
12. 3.5 Final accounts - questions
13. 3.5 Final accounts - simulations and activities
14. 3.6 Ratio analysis - notes
15. 3.6 Ratio analysis - questions
16. 3.6 Ratio analysis - simulations and activities
17. Printable version

Case study (1) - profit and cash flow

A company produces and sells DVD's to the Retail Trade. The firm sells packs of 10 DVD's, at a cost of $100 per pack. The cost to the company, per pack, are summarised below:

Labour $10 per pack

Materials $15 per pack

Overheads and expenses $25 per pack

All costs are paid in cash as they are incurred. Sales may be made for cash or on 4 weeks credit.

At the start of the period the firm has $100,000 in the bank, and has built up a profit of $250,000.

Question 1

Calculate the profit made on the sale of a pack of DVD's.

Examine the actions described below and calculate the effect of them on the firm's cash flow and profit position. You are advised to use the pro-forma stock chart and cash book by clicking on this link: [Pro-forma].

Question 2

In month 1 the firm makes 10,000 packs, but sells 5,000 packs for cash. Show the impact of these transactions on cash, profit and stock levels.

Question 3

In month 2, the firm makes another 15,000 packs, but sells 7,000 packs on one month free credit.

Question 4

In month 3, the firm makes another 15,000 packs, but sells 10,000 packs for cash and 5,000 on one month free credit.

Question 5

In month 4, the firm makes another 10,000 packs, but manages to sell only 7,000 packs, then only on one month free credit.

Question 6

In month 5, the firm makes another 15,000 packs, but sells 5,000 packs for cash and 10,000 on one month free credit.

Question 7

In month 6, the firm makes only 5,000 packs, but sells 7,000 packs on one month free credit, and 13,000 packs for cash.