You are presented with the following information extracted from your organisation’s financial statements for the year ended 31 December 2019. Sales on 31 December 2019 were K110 million. For the year 2020, sales are expected to grow at 8% per month for the year. 90% of the sales made are on account; the remainder on cash. Credit customers pay as follows: 85% in the month following the sale; 10% two months after the sale month. Irrecoverable debts are expected at the historical norm of 5% of credit sales. Inventory levels are maintained at 20% of the following month’s sales. Accounts payables are at settled at 30 days after purchase. QUESTION Prepare a cash flow forecast for the three-month period from January to March 2020. 2. Calculate the following for each month of the forecast period: Inventory days Accounts receivable days Accounts receivable days Cash conversion cycle
You are presented with the following information extracted from your organisation’s financial statements for the year ended 31 December 2019. Sales on 31 December 2019 were K110 million. For the year 2020, sales are expected to grow at 8% per month for the year. 90% of the sales made are on account; the remainder on cash. Credit customers pay as follows: 85% in the month following the sale; 10% two months after the sale month. Irrecoverable debts are expected at the historical norm of 5% of credit sales. Inventory levels are maintained at 20% of the following month’s sales. Accounts payables are at settled at 30 days after purchase. QUESTION Prepare a cash flow forecast for the three-month period from January to March 2020. 2. Calculate the following for each month of the forecast period: Inventory days Accounts receivable days Accounts receivable days Cash conversion cycle
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter9: Corporate Valuation And Financial Planning
Section: Chapter Questions
Problem 1P: Broussard Skateboard’s sales are expected to increase by 15% from $8 million in 2018 to $9.2 million...
Related questions
Question
You are presented with the following information extracted from your organisation’s financial statements for the year ended 31 December 2019.
- Sales on 31 December 2019 were K110 million. For the year 2020, sales are expected to grow at 8% per month for the year.
- 90% of the sales made are on account; the remainder on cash.
- Credit customers pay as follows:
- 85% in the month following the sale;
- 10% two months after the sale month.
- Irrecoverable debts are expected at the historical norm of 5% of credit sales.
- Inventory levels are maintained at 20% of the following month’s sales.
- Accounts payables are at settled at 30 days after purchase.
QUESTION
- Prepare a cash flow
forecast for the three-month period from January to March 2020.
2. Calculate the following for each month of the forecast period:
-
- Inventory days
Accounts receivable days- Accounts receivable days
- Cash conversion cycle
Briefly explain the implication of your assessment in (2) above on the continued management of the
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 4 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Fundamentals Of Financial Management, Concise Edi…
Finance
ISBN:
9781337902571
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Fundamentals Of Financial Management, Concise Edi…
Finance
ISBN:
9781337902571
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College