Reference no: EM131577923

Cash flow exercise

Joseph Pharmacy had sales of $25,000 in December and $30,000 in January. The company expects sales of $20,000 in February and $40,000 in both March and April, and $30,000 in May. The company has no other source of cash inflows. Half of the sales are paid for with cash. Twenty-five percent are paid for in each of the two months following the sale.

Joseph Pharmacy has the following expenses: (show all of your work) and submit in APA format. Title page, introduction and conclusion apply here.

- Monthly rent of $1,500
- Wages of $5,000 each month
- Purchases
o 50% of next month's sales
--------------------------------------------------------------
o Cash Outlay
- 20% in month purchased
- 80% in the previous month

From the information provided:

1. Calculate the projected Cash Receipts for the three months of February, March, and April (Tables have been set up for you)

A Schedule of Projected Cash Receipts for Joseph Pharmacy

 

Sales forecast	December	January	February	March	April
Cash Sales
Collection of AR: Lagged 1 Month Lagged 2 Months
Other Cash Receipts
Total Cash Receipts

2. Calculate the projected Cash Disbursements for the same months

A Schedule of Projected Cash Disbursements for Joseph Pharmacy

Sales	December	January	February	March	April
Purchases (50% of next month's sales) Current month (.20) Lagged 1 month (.80)
Rent payments
Wages/Salaries
Total

3. Indicate what the total cash balance would be at the end of these three months if the cash balance at the beginning of February was $1,500.

February Cash balance
Total Cash Receipts	December	January	February	March	April
Cash Disbursements
Balance
Balance from Feb - April

If I have a budget where expected gross receipts are what is obtained in

#1 and my expected cash disbursements are what is obtained in

#2. What can you tell me about the cash balance (obtained in #3) if you were doing a variance analysis? How would you attempt to explain the variance?