Cash flow exercise
Joseph Pharmacy had sales of $25,000 in December and $30,000 in January. The company expects sales of $20,000 in February and $40,000 in both March and April, and $30,000 in May. The company has no other source of cash inflows. Half of the sales are paid for with cash. Twenty-five percent are paid for in each of the two months following the sale.
Joseph Pharmacy has the following expenses: (show all of your work) and submit in APA format. Title page, introduction and conclusion apply here.
- Monthly rent of $1,500
- Wages of $5,000 each month
- Purchases
o 50% of next month's sales
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o Cash Outlay
- 20% in month purchased
- 80% in the previous month
From the information provided:
1. Calculate the projected Cash Receipts for the three months of February, March, and April (Tables have been set up for you)
A Schedule of Projected Cash Receipts for Joseph Pharmacy
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Sales forecast
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December
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January
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February
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March
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April
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Cash Sales
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Collection of AR:
Lagged 1 Month
Lagged 2 Months
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Other Cash Receipts
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Total Cash Receipts
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2. Calculate the projected Cash Disbursements for the same months
A Schedule of Projected Cash Disbursements for Joseph Pharmacy
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Sales
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December
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January
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February
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March
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April
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Purchases
(50% of next month's sales)
Current month (.20)
Lagged 1 month (.80)
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Rent payments
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Wages/Salaries
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Total
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3. Indicate what the total cash balance would be at the end of these three months if the cash balance at the beginning of February was $1,500.
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February Cash balance
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Total Cash Receipts
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December
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January
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February
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March
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April
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Cash Disbursements
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Balance
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Balance from Feb - April
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If I have a budget where expected gross receipts are what is obtained in
#1 and my expected cash disbursements are what is obtained in
#2. What can you tell me about the cash balance (obtained in #3) if you were doing a variance analysis? How would you attempt to explain the variance?