To find the Net Cash Flow for August:
First, calculate Sales Revenue (SR) for June and July.
Use the following formulae:
Single period: Sales/ (1+growth rate)
Two or more periods: Sales/ (1+growth rate) ^Period
August SR: $250,000
July SR: $250,000/1.08 = $231,481.48
June SR: $250,000/1.08^2 = $214,334.70
Next, calculate Gross Sales (Cash Inflows) for June and July.
July 0.45*214334.70 = 96450.62
June 0.3*231481.48 = 69444.44
= Sales $165,895.06
Cash Receipt 10,000.00
Total Gross Sales* $225,895.06
Finally, calculate Operating Expenses (Cash Outflows).
Manpower costs of 50,000.00 ($2,000+20% of sales)
Inventory purchases** 91,875.00 (35% of next mo. sales)
=Total Op. Expenses $143,875.00
Subtract (-) Total OE from GS
=Total Net Cash Flows $82,020.06
*Unrecoverable or doubtful accounts must be entered as a double ledger 1) Allowance for doubtful accounts; 2) Unrecoverable
In this case unrecoverable accounts = 5% or $12,500.00
**Apply inventory purchases formula:
Percentage of next month sales x Sales x Growth Rate