cash_flow_worksheet.doc - Cash Flow Forecasts EXERCISE ONE Sam Cutlet runs a meat wholesale unit in Reading His main payments include purchases of meat

# cash_flow_worksheet.doc - Cash Flow Forecasts EXERCISE ONE...

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Cash Flow Forecasts EXERCISE ONE Sam Cutlet runs a meat wholesale unit in Reading. His main payments include purchases of meat, the wages of two butchers, a van driver and a secretary which he employs, expenses such as electricity payments, and money he withdraws for his own use. Most of his sales to retailers, for example, are on 30 days credit, although some small customers pay immediately with cash. The table below outlines Sam’s cash flow forecast for the period July to December. July Aug Sept Oct Nov Dec RECEIPTS Cash Sales 2,000 2,000 2,000 2,000 4,000 10,000 Credit Sales 8,000 8,000 9,000 9,000 10,000 16,000 Total Receipts 10,000 10,000 11,000 11,000 14,000 16,000 PAYMENTS Purchases 3,000 3,500 3,500 4,000 8,000 16,000 Wages (butchers) 2,000 2,000 2,000 2,000 2,000 4,000 Wages (driver/Secretary) 1,400 1,400 1,400 1,400 1,400 2,800 Electricity 900 2,500 Telephone 200 250 Rent and Insurance 12,000 Drawings 1,500 1,500 1,500 1,500 1,500 1,500 Motor and Misc 500 500 500 500 500 500 Total Payments 8,400 9,100 9,800 9,400 25,650 27,300 Net Cash flow 1,600 900 1,200 1,600 (11,650) (1,300) Opening Balance 1,700 3,300 4,200 5,400 7,000 (4,650) Closing Balance 3,300 4,200 5,400 7,000 (4,650) (5,950) QUESTIONS: 1.Identify months in which Sam has a cash flow problem and explain why this problem has occurred.