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    Tools in Managing Cash, Receivables, and Inventory

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    Cali Shandy H.
    The document discusses various financial planning tools used to manage cash, receivables, and inventory, including sales budgets, production budgets, cash budgets, projected financial statements, days of inventory, days of sales outstanding, cash conversion cycle, and days of payable outstanding. These tools help forecast sales, production levels, cash flows, and working capital needs to effectively plan and monitor a company's financial performance and position.

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    Tools in Managing Cash, Receivables, and Inventory

    Uploaded by

    Cali Shandy H.
    98 views12 pages
    The document discusses various financial planning tools used to manage cash, receivables, and inventory, including sales budgets, production budgets, cash budgets, projected financial statements, days of inventory, days of sales outstanding, cash conversion cycle, and days of payable outstanding. These tools help forecast sales, production levels, cash flows, and working capital needs to effectively plan and monitor a company's financial performance and position.

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    8 Tools-in-Managing-Cash-Receivables-and

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    The document discusses various financial planning tools used to manage cash, receivables, and inventory, including sales budgets, production budgets, cash budgets, projected financial statements, days of inventory, days of sales outstanding, cash conversion cycle, and days of payable outstanding. These tools help forecast sales, production levels, cash flows, and working capital needs to effectively plan and monitor a company's financial performance and position.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    98 views12 pages

    Tools in Managing Cash, Receivables, and Inventory

    Uploaded by

    Cali Shandy H.
    The document discusses various financial planning tools used to manage cash, receivables, and inventory, including sales budgets, production budgets, cash budgets, projected financial statements, days of inventory, days of sales outstanding, cash conversion cycle, and days of payable outstanding. These tools help forecast sales, production levels, cash flows, and working capital needs to effectively plan and monitor a company's financial performance and position.

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    © All Rights Reserved
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    Tools in Managing Cash,

    Receivables, and Inventory


    Sales Budget
    • The most important account in the financial
    statement in making a forecast is sales since most
    of the expenses are correlated with sales.
    External and Internal factors should be considered in
    forecasting sales:
    INTERNAL EXTERNAL
    • Gross Domestic Product • production capacity
    (GDP) growth rate • man power requirements
    • Inflation • management style of
    • Interest Rate managers
    • Foreign Exchange Rate • reputation and network of
    • Income Tax Rates the controlling stockholders
    • Developments in the • financial resources of the
    industry company
    • Competition
    • Economic Crisis
    • Regulatory Environment
    • Political Crisis
    Production Budget
    • A production budget provides information regarding the
    number of units that should be produced over a given
    accounting period based on expected sales and targeted
    level of ending inventories.

    • Required production in units = Expected Sales + Target Ending


    Inventories - Beginning Inventories
    Cash Budget

    • For a business enterprise, having the right amount of


    cash is important since cash is used to make payments
    for purchases, for operational expenses, to creditors,
    and for other transactions.
    • - The cash budget forecasts the timing of these cash
    outflows and matches them with cash inflows
    from sales and other receipts. The cash budget is also
    a control tool to monitor the way the company handles
    cash.
    Projected Financial Statements

    • Projected financial statements is a tool of the


    company to set an overall goal of what the company’s
    performance and position will be for and as of the end
    of the year. It sets targets to control and monitor the
    activities of the company.
    ‣ Projected Income Statement
    ‣ Projected Statement of Financial Position
    ‣ Projected Statement of Cash Flows
    Financial Planning Tools and Concepts
    Days of Inventory

    • or inventory conversion period or average age of


    inventories, is the average number of days to sell its
    inventory
    Days of Inventory = 365 (or 360 days) / Inventory Turnover

    • Inventory Turnover = Cost of Goods Sold


    Beginning Inventory + Ending Inventory
    2
    Days of Inventory = Average Inventory/ Average COGS per day
    Days of Sales Outstanding

    • the average time for the company to collect its receivables


    Days of Inventory =360 (or 365 days) / Receivable
    Turnover

    Receivable Turnover = Net Credit sales


    Beginning and Ending Accounts
    Receivables/2
    Cash Conversion Cycle

    • also called the net operating cycle


    • The Cash Conversion Cycle is the length of time it takes for
    the initial cash outflows for goods and services purchased
    (materials, labor, etc.) to be realized as cash inflows from
    sales (cash sales and in the collection of receivables).
    operating cycle less days of payable.
    Cash Conversion Cycle = Operating Cycle - Days of
    Payables
    Cash Conversion Cycle = (Days of Inventory + Days of
    Receivables) - Days of Payables
    Days of Payable Outstanding
    • is the average number of days for the company to
    pay its creditors.
    Days of Inventory = 365 (360 days) /Payable Turnover

    Payable Turnover = Net Credit Purchases


    Beginning + Ending Accounts
    Payables/2

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