PART A Question: Imagine you are the finance manager of Al Mohsin Company. The company management feels that the cash management of the company should be made more effective. The following information from the company's records is available to you: Additional Information 1. Al Mohsin LLC expects to have RO 8,000 cash balance at the beginning of April. 2. Period of credit allowed by suppliers - 1 month for 50% and 2 months for balance 3. 50% of the total sale is for cash. Half of the credit sale is collected in the next month of sale and the remaining half in the following month after that. 4. Delay in payment of wages 1/4 month 5. Delay in payment of expenses 1/2 month 6. 10% of Overheads paid in the same month and remaining in the following month. 7. Income tax to be paid in the month of June RO 1,500. 8. Dividend of 6% of share capital RO 250000 to be paid in June 9. Received 10% return on investment of RO 750000 You are required to : a. Prepare an estimate of cash position for three months from April to June. b. Based on the budget prepared, evaluate the cash position of the company, give your comments and provide suitable suggestion to the management on effective cash management.

A Cash Budget needs to be prepared using the given information about Al Mohsin LLC.'s income and expenses, in order to estimate its cash position for April-June. Without specific information on the company's sales and overhead expenses, however, an accurate Cash Budget cannot be created. Based on the Cash Budget, suggestions might be made for improving the company's cash management.

Explanation:

To answer your question about preparing an estimate of Al Mohsin LLC.'s cash position for the months of April-June, we would need to create a Cash Budget. This involves taking into account all the given information about the company's income and expenses, including the delay in payment of wages and expenses, the period of credit allowed by suppliers, and income tax and dividend payments. However, without specific information on the company's sales and overhead expenses, it is impossible to create an accurate Cash Budget.

Based on the Cash Budget, we could then evaluate the cash position of the company and potentially suggest improvements. Suggestions for effective cash management usually involve either increasing cash inflows or decreasing cash outflows. For example, the company could try to increase its cash sales, speed up collections of credit sales, or negotiate longer credit terms with suppliers.

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