What is the ending cash in September if the starting cash was $20,000 in August?
We have a company which had been growing at a rate of 8% but is now expected to be growing at 5% from this month (August) on (i.e. the growth from August to September is 5% while the growth from July to August is 8%). The company collects 20% of its sales COD(cash on delivery), 30% of the sales in the month following the sale, and 45% of the sales in the second month following the sale while 5% is considered unrecoverable. Manpower costs are $2000 per month plus 20% of sales. Inventory purchases are 35% of the next month's sales. Assuming, that there is a one time receipt of $10,000 cash in August, that there are no other money-in and money-out flows, that the Sales in August will be $250,000.
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The sales revenue in the month of August is $250000. In the period prior to August, the company has been growing at a rate of 8% per month. This gives a sales revenue of $250000/1.08 = $231481.48 in July and a sales revenue of $250000/1.08^2 = $214334.70 in the month of June.
The company collects 20% of its sales COD(cash on delivery), 30% of the sales in the month following the sale, and 45% of the sales in the second month following the sale while 5% is considered unrecoverable.
In the month of August there is a cash inflow from the sales in the month of June and July. The two add up to give 0.3*231481.48 + 0.45*214334.70 = $165895.05. In addition to this 20% of the sales in August are received as cash, this is $50000. In the month of September, 45% of sales in July and 30% of sales in August are received in addition to 20% of the sales of September.
The gross inflow from sales in the month of August is $215895.05. There is a one-time cash receipt of $10000 that makes the gross inflow $225895.05. The gross inflow from sales in September is 0.45*231481.48 + 0.3*250000 + 0.2*250000*1.05 = $231666.67.
The gross inflow in August and September is $457561.72
The outflows in the month of August are manpower costs of $2000, 20% of sales which is $50000, inventory purchases that are 35% of the following month's sales or 0.35*250000*1.05 = $91875. In September, the outflows are manpower costs of $2000, 20% of sales which is $52500 and inventory purchases of 35% of next month's sales or $96468.75. The outflows for the two months add up to $294843.75
The net cash inflow in the two months is $162717.97
As the starting cash at the beginning of August was $20000, the ending cash in September is $182717.97
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