Question

CASH FLOW FORECAST Happy Manufacturing had sales of $65,000 in March and $75,000 in April. Forecast sales for May, June and July are $85,000, $95,000, and $120,000, respectively Given the following data, calculate monthly net cash flow for the months of May, June, and July (1) The firm makes 20% of sales for cash; 30 % are collected in the next month, and the remaining 50% are collected in the second month following the sale. The firm receives other income of $2,500 per month (2) $55,000 $95,000, and $85,000 for the months of May through July, respectively (3) The firm's actual or expected purchases, all made for cash, are Rent is $10,000 per month (4) Wages and salaries are 10% of the previous month's sales (5) Cash dividends of $40,000 will be paid in June. (6) Payment of principal and interest of $15,000 is due in June. (7) A cash purchase of equipment costing $30,000 is scheduled in July (8) Taxes of $10,000 are due in June. (9) The format shown below may help you organize your analysis. April July March May June $65,000 $75,000 $85,000 $95,000 $120,000 Total Sales Receipts Collection fom Current Month Sales Collection from 1 Month Ago Sales Collection from 2 Months Ago Sales Other income Total cash receipts July May June Disbursements Purchases Rent Wages & salaries Dividends Principal & Interest Purchase of new equipment Taxes due Total cash disbursements July May June Total cash receipts (from above) Total cash disbursements (from above) Monthly Net Cash Flow Cumulative Net Cash Flow

Answer 1

Formula	Month (n)	March	April	May	June	July
	Total Sales (S)	65,000	75,000	85,000	95,000	1,20,000
	Receipts			May	June	July
20%*current month sales	Collection from current month sales (C1)			17,000	19,000	24,000
30%*previous month's sales	Collection from 1 month ago sales (C2)			22,500	25,500	28,500
50%*two months' previous sales	Collection from 2 months ago sales (C3)			32,500	37,500	42,500
	Other income (O)			2,500	2,500	2,500
(C1+C2+C3+O)	Total cash receipts (CR)			74,500	84,500	97,500
	Disbursements			May	June	July
	Purchases (P)			55,000	95,000	85,000
	Rent ('R)			10,000	10,000	10,000
10%*previous month's sales	Wages & salaries (W)			7,500	8,500	9,500
	Dividends (D)				40,000
	Principal & interest (PI)				15,000
	Purchase of new equipment (NE)					30,000
	Taxes due (T)				10,000
(P+R+W+D+PI+NE+T)	Total cash disbursements (CD)			72,500	1,78,500	1,34,500
				May	June	July
CR	Total cash receipts			74,500	84,500	97,500
CD	Total cash disbursements			72,500	1,78,500	1,34,500
CR-CD	Monthly net cash flow (MCF)			2,000	(94,000)	(37,000)
CCFn-1 + MCFn	Cumulative net cash flow (CCF)			2,000	(92,000)	(1,29,000)