Working Capital Management

ASSIGNMENT

GROUP ONE – EVENING SESSION

MEMBERS:
DWAMENA ALEX S.
ERASMUS KORLEY
AMPADU RAPHEAL
AGYAPONG FRANCIS

Assume that Just-in-time stock management is used in accordance with the recommendation of the consultants. Calculate receipts from sales for each of the six months ending 30th June, 20x0

Solution:

Note: High demand cannot be satisfied with a just in time stock management system. Therefore, over calculation for expected sales will be based on medium and low demand.

SALES WORKING (£)
Cash Receipt February = 19000 X 0.1 = 1900
Credit sales ½ X (19900 – 1900) = ½ X 17910=8955
Credit M = 2.5% X 8955 = 2239 = 224
Discount credit receipt in March = 8955- 224= 8731

Cash receipt March = 23900 x 0.1 = 2390
Credit sales ½ x (23900- 2390) = 10755
Credit M = 0.025x 10755=269
Discount credit receipt in April= 10755-269=10456

Cash Receipt April = 27900 X 0.1 = 2790
Credit sales ½ x (27900-2790) = 12555
Credit M = 1255 X 2.5% =314
Discount credit receipt in May = 12555 – 314 = 12241

Cash Receipt May = 26900 X 0.1 = 2690
Credit sales ½ x (26900-2690) = 12105
Credit M = 12105 X 2.5% =303
Discount credit receipt in June = 12105 – 303 = 11802

sales Workings 2

Credit sales Receipt in April :
½ of credit sales in February
½ x 17910 = 8955

Credit sales Receipt in May :
½ of credit sales in March
½ x 21510 = 10755

Credit sales Receipt in June:
½ of credit sales in April
½ x 25110 = 12555

Medium Demand
Low Demand
Expected Sales
February
20000 X 0.9
19900 X 0.1
19900
March
24000 X 0.9
23000 X 0.1
23900
April
28000 X 0.9
27000 X 0.1
27900
May
27000 X 0.9
26000 X 0.1
29900
June
33000 X 0.9
32000 X 0.1
32900

Now we are about to compute for receipts from sales for each month for the six months.
Note: only cash flows from sales are required and capital emanated from inflow by Brape will be controlled and receipt in this context for the first month where no sales is assured to be made.

Receipt
JAN
FEBRUARY
MARCH
APRIL
MAY