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?