Question

The Chief Financial Officer (CFO), Karl Richland of Semtell Company in Cincinnati, Ohio is asking for your advice. The CFO explains sales are increasing but there is a constant matter of not having enough cash to meet payroll or pay vendors within 30 days.

Checklist: Prepare a business letter (see the rubric) to the CFO to explain:

1. Explain why cash can go down even when sales are up; refer to “receivables.”
2. Analyze the scenario and explain three accounts the CFO should review each day and explain why. Focus on short-term balance sheet accounts, i.e., “receivables and payables.”
3. Your business letter should:

• Use the accepted business letter format and example as provided above.
• Utilize Standard English and use correct spelling and grammar.
• Provide a clearly established and sustained viewpoint and purpose.
• The writing should be well ordered, logical and unified, as well as original and insightful.

Answer 1

14 january 2020

karl Richland

Chief Financial Officer

Semtell company

Cincinnati

Dear Mr.Karl Richland:

1. Sales can be increased by increasing the number of units sold or by increasing the sales price,this will increase the profit.But cash may not increase inspite of increase in sales, this may be due to the following reason

• increase in trade receivables-if credit sales are more,availability of cash will be less
• increase in variable cost-variable cost will increase with the increase in number of unit

2. CFO should review each day the following accounts

• trade receivables account
• trade payables account
• expenses account

sincerely,

ohio