Using the information on collections from the previous problem ( if it is not your previous question, find the question asking for the cash projection in June) and also assuming that purchases (COGS) in each month will be equal to 60% of the projected sales, the actual payments will lag the purchases by one month, and the additional disbursements (not related to COGS) will be $175,000 in April, $125,000 in May, and $150,000 in June - determine the net cash flow for June.

Question

BlackTom AI · Accepted Answer

To determine the net cash flow for June, we must account for two components: cash inflows (collections) in June and cash outflows (payments) in June.

First, the problem states that purchases (COGS) in each month equal 60% of projected sales. It also says payments lag purchases by one month. This means the cash outflow in June due to COGS is the June payment for May purchases, which equals 60% of May projected sales.

Second, there are additional disbursements not related to COGS: $150,000 in June.

Third, cash inflows in June come from collections in June. These collections depend on the schedule of sales and the collection pattern (e.g., what percentage is collected in June from current month sales, and from prior months’ sales). Without the actual collection pattern or the May projected sales figure, we cannot compute the exact amount of cash collected in June.

Because the question references data from a previous problem (collections and the May projection) that is not provided here, the exact net cash flow for June cannot be determined from the information given alone. Consequently, evaluating which of the listed options ($82,500, -$82,500, -$55,000, $55,000) is correct requires those missing numbers.

For option-by-option reasoning:
- $82,500: This positive value would imply June inflows exceed June outflows by $82,500, requiring specific collection and May-purchase figures to align. Without those figures, this value could be possible only if the June collections and the 60% of May sales balance accordingly after adding $150,000 in June disbursements.
- -$82,500: A negative net cash flow of this magnitude would indicate June outflows exceed inflows by $82,500, given the same missing data caveat about May sales and June collections.
- -$55,000: Another negative result that would correspond to a particular combination of June collections and May-purchase payments after including the June disbursement, still contingent on the missing inputs.
- $55,000: A positive net cash flow of this size, likewise, hinges on the exact June collections and May-purchase payments and the June fixed disbursement.

In summary, the calculation cannot be completed accurately without the May projected sales (to compute 60% of May sales for June payments) and the June collections schedule (to compute cash inflows in June). Once those two pieces are provided, you would:
- Compute June outflows: 0.60 × May projected sales (for May purchases paid in June) + $150,000 (June disbursements).
- Determine June inflows: cash collections for June from current and prior month sales per the given collection pattern.
- Net cash flow for June = June inflows − June outflows.

Until those inputs are supplied, selecting a specific option among the four is not justifiable, as each option represents a different balance that depends on the missing data.

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