Cash Management L4 AQ2013 PA2 Help?

Hi :)

I am doing the Cash Management practice assessment 2 2013 and I'm stuck (again) on how some of the balances are calculated. I have tried to work it out myself, and I'll write down what it is I'm doing so hopefully someone can tell me what it is I'm doing wrong.

Task 5b) Link to task question:
End of period 4: Original and revised forecast trade receivables balances.

My calculation of original TR balance:
58% of P3 [2,740,000] = £1,589,200
62% of P2 [2,700,000] = £1,674,000
80% of P1 [2,500,000] = £2,000,000
Total = £5,263,200

The answer should be = £4,969,200

My calculation of revised [10% inc] TR balance:
40% of P2 [2,970,000] = £1,080,000
60% of P1 [2,750,000] = £1,500,000
Total = £2,580,000

The answer should be = £7,326,000

What am I doing wrong?

Task 5c)
"A company is considering a marketing campaign to increase demandd for it's product. The marketing campaign will cost £2 million over a two month period. The sales are expected to increase by £300,000 per month from month 3 onwards. In anticipation of the demand increase the company will increase inventory levels in months 1-3 by £200,000 per month. Inventory will be paid for in the month following purchase, the marketing caampaign will be paid for in month 2 and the sales are received in the month following sale."

The answer is: The cumulative cash flow will reduce by £2,400,000
How would you even attempt this?

Thank you in advance!


  • shannq1
    shannq1 Registered Posts: 1
    5B) the answer would be

    20% of P2 + 38% and 20% of P3 + P4 Balance

    540,000 + 1,589,200 + 2,840,000= 4,969,200.

    40% of P2 + P3 balance + P4 Balance

    1,080,000 + 2,740,000 + 2,840,000 x 10% increase (x1.10)= 7,362, 200.

    5C) This means the revenue/cost that will have a positive/negative impact on the cash flow.


    Cost of Marketing = £2,000,000 paid in month 2

    Cost of Inventory = month 1-3 £200,000 per month= 200,000 x 3= 600,000

    Inventory paid month after purchase therefore month 3 inventory will be paid in month 4. Therefore only 2 months inventory will be paid from the £600,000 which equals to £400,000.

    The answer is

    Cost of Marketing paid in P2 £2,000,000
    Cost of Inventory paid £4,000,000

    = £2,400,000.

    This will reduce the cashflow by £2,400,000
  • pittuck23
    pittuck23 Registered Posts: 6
    Hi Shannq1

    Could you explain in more detail how you got the figures for 5b?

    If the 20% is left to pay from Period 1 then why is the calculation of £540000 based on 20% of P2??

    Also how did you get the £1589000?


  • petitechocoholic
    petitechocoholic Registered Posts: 8
    In part C is 4,000,000 a mistake? I think it's meant to say 400,000?
Privacy Policy