# Cash Management L4 AQ2013 PA2 Help?

Registered Posts: 10
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.

https://flickr.com/photos/124836893@N07/15825413136/
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?

"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?

• Registered Posts: 1

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.

Costs=

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.

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
• 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?

thanks

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