Page 187 - Microsoft Word - 00 ACCA F9 IWB prelims 2017.docx

Working capital management – Cash and funding strategies

Question 1

Cash forecasting

Sales (before discounts) for a company are predicted to be as follows:

Month 1 2 3 4 5 6

($000) 50 55 58 63 70 74

20% of the sales will be for cash, with customers taking a 2% discount. 40% of
sales will pay in the following month and 35% in two months. The remaining
5% will be written off as bad debts.

Calculate the cash receipts for months 3 to 6.

Month 3 4 5 6

Cash (20% × 98%) 11.4 12.3 13.7 14.5

1 month (40%) 22 23.2 25.2 28

2 months (35%) 17.5 19.3 20.3 22.1

Total 50.9 54.8 59.2 64.6

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