CASH MANANGEMENT-Please help stuck on question

jo30

Please help exam monday. i get all figures correct but unsure weather my numbers should be positive or negetive within receipts and payments.

Question one-2.1 IN Revision 1

Question states "using your calculations from b and c compleate effect of changes to sale receipts and purchase payments. then it lists orginal net flow,changes in sales receipts, changes in purchases payments, revised net cash flow and opening balance and closing.

My question is changes in sales receipts are they always negetive (minis) and
purchase payments always postive.

thanks

Jo Clark

Hello Jo

Is this question from one of the practice assessments?

My advice is to read the guidance in the exam as it usually tells you whether to use a leading minus etc. when answering questions.


JC

Nps

I've only had chance to quickly read the question, but if I understand it correctly, you're asked to work out the cash flow, and then as you go though the question, you get amendments which affect the cash flows.

So in answer to your question, the changes in sales receipts and purchase payments can be positive or negative. If you were expecting say £100 in month 2 but then your customers start taking longer to pay, you'd see your sales receipts decrease, but if you shortened their credit terms, you'd see sales receipts increase. The same happens with purchase payments, if your suppliers start reducing your credit terms, you'd see your cash outflows increase as you are paying your bills earlier than shown in the original forecast, but if they increased your credit period, your cash outflows would decrease.

Obviously in both cases, the eventual cash flows are the same as ultimately you are still receiving the same amount of money, and paying out the same amount (just earlier or later than expected) but the point of cash flows is to show the monthly movements of the cash, so can go up or down in any particular month compared to the original forecast.