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Bentley Cat Food Company Three Shareholders, Bently, Izzy and Cooper have just set up a small company that distributes natural cat food . Marketing and

Bentley Cat Food Company

Three Shareholders, Bently, Izzy and Cooper have just set up a small company that distributes natural cat food . Marketing and Selling
is done only via the intranet. When they started the business each Partner contributed $12,000 each in return for the initial
share issue.
The Company started out very slow, but the market is growing and sales have increased significantly. The owners have been putting
all of their efforts into buying and selling. Credit control has been ignored an Izzy (the Accountant) has let the work on the
cash flow slip
The owners are in the middle of a conference when the receiptionist interrupts them to tell them the Bank Manager is on the phone.
The account is in overdraft and they must call her back immediately or she will call the overdraft in. Cooper was irritated. ' what is
this about? Does this mean that I have to cancel my order for the new BMW?
Izzy went to his office. He had not really cheked the cash position for over two months. He was a little worried.
His records showed the following.
Overheads:
Rent ( Due 1st of month). - Office $3,000 per month.- two months have been paid, rest of the invoices are sitting the A/P Analyst desk
Furniture- ( Due the 20th of month). $1,000 per month - one month paid) , A/P Analyst has put these invoices in a folder
and never entered them into A/P
Cars - $1,000 per month - due 15th of month- Purchased in Month 2, however only 1st month paid
Rates, Insurance, ( due weekly). $1,000 per month. All months paid
Taxes $500 per month . None paid
Services: ( due weekly). $250 per month, all months paid
Salaries - ( paid semi-monthly). $9,500 per month, Payroll is current
Sundries : $2,000 per month - all months paid
Sales. ( credit terms are net 30 days)
Sales are shipped as follows 1st week of month = 25% 2nd week = 20% ; 3rd week = 20%; 4th week = 35%
AR collection pattern is 70% is collected timely, 10% paid 10 days late, 15% paid 20 days late; and 5% paid 30 days late
Month 1: $15,000.
Month 2: $24,000.
Month 3: $30,000
Month 4: $40,000
Month 5: $ 86,000
Purchases (vendor terms are net 30 days). All purchases were purchased equally throughout month
Checks are processed weekly on Thursdays, payments were paid within vendor terms in Month 1 and 2. The A/P Analyst was
working on a project in month 3 and half of the payments were paid 10 days late. In month 4, the A/P Analyst was tired of
phone calls requesting payment, so he/she started paying vendors 15 days early and continued this practice through today.
Month 1: $8,000
Month2: $15,000
Month3: $25,000
Month4: $55,000
Month 5: $60,000
Was he right to be worried, and will Cooper get his car?
a). Prepare a weekly cash forecast going out 6 months. Assume Sales in month 6 is $80,000 and purchases are $50,000
b). Prepare a 13 week cast forecast to present to the bank
c). What ideas and suggestions would you give to the Bently Cat Food Company to get their Company back on track with the bank and to keep them
in a positive cash flow. (up to 5)
Make sure you prepare a professional forecast in a clear neat format.

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