Finance assignment – down east pharmaceuticals
May 3rd, 2020
Down East PharmaceuticalsKathleen Rogan of Down East Pharmaceuticals has engaged you as a consultant. Download and read the scenario. Download and use thespreadsheet for analysis.
Based on the information, do the following:
- Develop the following first year data:
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- The company’s projected average collection period (ACP), also called days sales outstanding (DSO).
- The company’s projected average daily sales. (Use a 360-day year.)
- The company’s projected average receivables level.
- The end-of-year balance sheet figures for accounts receivable and notes payable assuming that notes payable are used to finance the investment in receivables.
- The projected annual dollar cost of carrying the receivables.
- The receivables level at the end of March and the end of June. Note that the receivables level forecasts, and all forecasts required by the following questions, should be based on these assumptions: (a) the monthly sales forecasts given in Table 1 are realized and (b) the company’s customers pay exactly as predicted.
- The company’s forecasted average daily sales for the first three months of operations and for the entire half year.
- The implied ACP at the end of March and at the end of June.
- Aging schedules at the end of March and the end of June.
- Construct uncollected balances schedules at the end of March and at the end of June.
- Use the uncollected balances schedule to forecast receivables levels at the ends of March and June for the second year of operations.
This data is to be presented to venture capitalists who will ask questions concerning both the interpretation of the receivables data and the sensitivity of the results to the basic assumptions. Write an interpretation of the results of your analysis.
Present your analysis as a 2-page report in a Word document formatted in APA style.
| Receivables Management Case Study | A?© 2007 South University | |||||||
| Down East Pharmaceuticals | ||||||||
| Select the appropriate input values and enter them in cells colored red. Once you do this, the base case solution will appear. | ||||||||
| INPUT DATA: | KEY OUTPUT: | |||||||
| Sales Forecasts: | Average Collection Period (Days): | |||||||
| End of March | 39.6 | |||||||
| Month | Sales | End of June | 25.7 | |||||
| January | $100,000 | |||||||
| February | 250,000 | Receivables Balance: | ||||||
| March | 400,000 | End of March | $330,000 | |||||
| April | 600,000 | End of June | $300,000 | |||||
| May | 450,000 | |||||||
| June | 300,000 | Aging Schedules: | ||||||
| End of March | End of June | |||||||
| Assumed Collection Pattern: | 0 – 30: | 84.8% | 70.0% | |||||
| 30 – 60: | 15.2% | 30.0% | ||||||
| Month of sale | 30.0% | Over 60: | 0.0% | 0.0% | ||||
| One month after sale | 50.0% | |||||||
| Two months after sale | 20.0% | Payment Pattern: | ||||||
| End of March | End of June | |||||||
| Total | 90.0% | 90.0% | ||||||
| MODEL-GENERATED DATA: | ||||||||
| Calculation of Average | End of Month | |||||||
| Collection Period (ACP): | March | June | ||||||
| Receivables balance | $330,000 | $300,000 | ||||||
| Average daily sales | $8,333.33 | $11,666.67 | ||||||
| ACP | 39.6 | 25.7 | ||||||
| Aging Schedules: | ||||||||
| Age of | ||||||||
| Account | End of March | End of June | ||||||
| in Days | A/R | % | A/R | % | ||||
| 0-30 | $280,000 | 84.8% | $210,000 | 70.0% | ||||
| 30-60 | 50,000 | 15.2% | 90,000 | 30.0% | ||||
| 60-90 | 0 | 0.0% | 0 | 0.0% | ||||
| Total | $330,000 | 100.0% | $300,000 | 100.0% | ||||
| Uncollected Balances Schedules: | ||||||||
| End of March: | ||||||||
| Accts Rec | Remaining | |||||||
| Month | Sales | for month | Rec/Sales | |||||
| January | $100,000 | $0 | 0.0% | |||||
| February | 250,000 | 50,000 | 20.0% | |||||
| March | 400,000 | 280,000 | 70.0% | |||||
| Total | $330,000 | 90.0% | ||||||
| End of June: | ||||||||
| Accts Rec | Remaining | |||||||
| Month | Sales | for month | Rec/Sales | |||||
| April | $600,000 | $0 | 0.0% | |||||
| May | 450,000 | 90,000 | 20.0% | |||||
| June | 300,000 | 210,000 | 70.0% | |||||
| Total | $300,000 | 90.0% | ||||||
