Question
CASH FLOW BUDGETING PROBLEMS - COMPANY A - Company A is experiencing rapid growth due to the popularity of its recent hardware release. Current sales
CASH FLOW BUDGETING PROBLEMS -
COMPANY A -
Company A is experiencing rapid growth due to the popularity of its recent hardware release. Current sales of $100,000, which increased from $80,000 the previous month, are expected to grow at a 30 percent rate. Cost of sales are a stable 70 percent of sales revenue, yielding a 30 percent gross profit. Company A sales are 15 percent for cash with the remaining 85 percent collected the following month. Inventory-on-hand is maintained at a level to support the following month's sales. Inventory is paid for at the time of receipt. Ivy began the period with a cash balance of $65,000.
(a) For the current month and following three months, determine Company A's (revenue, cost of sales, etc).: (fill in the chart below)(PLEASE INCLUDE FORMULAS ON HOW PROBLEM IS SOLVED)
COMPANY A | Previous Month | Current Month | Month 1 | Month 2 | Month 3 | Month 4 |
Revenue | ? | ? | ? | ? | ? | ? |
Cost of sales | ? | ? | ? | ? | ? | ? |
Gross profit | ? | ? | ? | ? | ? | ? |
Accounts receivable | ? | ? | ? | ? | ? | ? |
Inventory | ? | ? | ? | ? | ? | ? |
Cash collections | ? | ? | ? | ? | ? | ? |
Cash disbursements | ? | ? | ? | ? | ? | ? |
(b) Is Company A gross sprofit increasing or declining?
(c) Is Company A cash flow increasing or declining?
(d) What is Company A cash balance at the end of the four-month period?
CASH FLOW BUDGETING PROBLEMS
COMPANY B -
Company B is experiencing rapid growth due to the popularity of its recent clothing line release. Current sales of $250,000, which increased from $190,000 the previous month, are expected to grow at a 20 percent rate. Cost of sales are a stable 35 percent of sales revenue, yielding a 65 percent gross profit. Company B sales are 30 percent for cash with the remaining 70 percent collected the following month. Inventory-on-hand is maintained at a level to support the following two months sales. Inventory is paid for at the time of receipt. Company B began the period with a cash balance of $70,000.
(e) For the current month and following three months, determine Company B (revenue, cost of sales, etc.): (fill in the chart below)(PLEASE INCLUDE FORMULAS ON HOW PROBLEM IS SOLVED
COMPANY B | Previous Month | Current Month | Month 1 | Month 2 | Month 3 | Month 4 |
Revenue | ? | ? | ? | ? | ? | ? |
Cost of sales | ? | ? | ? | ? | ? | ? |
Gross profit | ? | ? | ? | ? | ? | ? |
Accounts receivable | ? | ? | ? | ? | ? | ? |
Inventory | ? | ? | ? | ? | ? | ? |
Cash collections | ? | ? | ? | ? | ? | ? |
Cash disbursements | ? | ? | ? | ? | ? | ? |
(f) Is Company B gross profit increasing or declining?
(g) Is Comapny B cash flow increasing or declining?
(h) What is Company B cash balance at the end of the four-month period?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started