1 - 1. Mr. Mehta developed a monthly forecast of financial...

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Unformatted text preview: 1. Mr. Mehta developed a monthly forecast of financial statements using the current operating assumptions. As an alternative way of looking at the forecasted funds flows, Mr. Mehta also prepared a forecast of cash receipts and disbursements. To prepare a forecast on a business-as-usual basis, Mr. Mehta used various parameters such as Cost of goods sold (a figure that was up from recent years because of increasing price competition), operating expenses (up from recent years to include the addition of a quality control department, two new sales agents, and three young nephews in whom she hoped to built an allegiance to the Pundir family business), the company's income tax rate, and the exercise tax. Calculation using 2001 Forecast Annual Income Statements (Exhibit 2) and 2001 Forecast Balance Sheets (Exhibit 3) Days Inventories Outstanding (DIO) = Inventories / COGS per Day = 2,225,373 / (66,993,380 / 365) = 12.12 ( Round Up = 13 Days Days Sales Outstanding (DSO) = Account Receivable / Sales per Day = 3,715,152 / (90,900,108 / 365) = 14.92 ( Round Up = 15 Days Days Payables Outstanding (DPO) = Account Payable / COGS per Day = 1,157,298 / 66,993,380 / 365) = 6.31 ( Round Up = 7 Days Kota Fibres’ Cash Cycle = DIO + DSO – DPO = 13 + 15 – 7 = 21 Days...
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This note was uploaded on 05/21/2011 for the course ECON 123 taught by Professor Day during the Spring '11 term at Arab Open University, Amman.

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1 - 1. Mr. Mehta developed a monthly forecast of financial...

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