You are presented with the following flow forecasted cash flow data for your organization for the period May 2012 to December 2012.it has been extracted from functional flow forecasts that have already been prepared.
2012
Sales
Purchases
Wages
Overheads
Dividends
Capital expenditure May
Shs
80000
40000
10000
10000 June
Shs
100000
60000
12000
10000
20000 July
Shs
110000
80000
16000
15000
30000 Aug
Shs
130000
90000
20000
15000 Sept
Shs
140000
110000
24000
15000 Oct
Shs
150000
130000
28000
20000
40000 Nov
Shs
160000
140000
32000
20000 Dec
Shs
180000
150000
36000
20000
40000
You are also told the following:
a) Sales are 40% cash 60% credit. Credit sales are paid two months after month of sale
b) purchases are paid month following purchase
c) 75% of wages are paid in current month and 25% the following month.
d) Overheads are paid the month after they are incurred
e) Dividends are paid 3 months after they are declared.
f) Capital expenditure is paid two months after it’s incurred.
g) The opening cash balance is shs. 15000
The managing director is pleased with) the above figures as they show sales will have increased by more than 100% in the period under review. In order to achieve this he has arranged a bank overdraft with a ceiling of shs.50000 to accommodate the increase inventory levels and wage bill for overtime worked.
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