You are the financial controller of Pack West (Pty) Ltd. Your company is experiencing difficulties with their cash flows owing to the Covid-19 uncertainty. At the end of April 2022, you noticed that the total sales of the company keep decreasing while the total cost are relatively stable, and you are worried that the company will not have sufficient funds to pay the salaries of R50 000 for April. You have the following historical information at your disposal: Total sales were R125 000 in January, R115 000 in February, and R110 000 and R95 000 for March and April, respectively. Historical information shows that 70% of the total sales are for cash and the debtors pay as follows: 50% of the total debt one month after the sale, 30% in the following month and 20% in the third month after the sale. The total purchases for January were R100 000, R110 000 in February, and R100 000 and R105 000 for March and April, respectively. 30% of the total purchases are paid in cash and the rest of the creditors are paid 60% in the month following the purchase, 20% in the month after that and 20% in the third month after the purchase. Rent is R10 000 per month and the salaries stayed the same from January to April. There were no creditors and debtors outstanding at the end of December 2021 and the closing cash balance at the end of December 2021 was R150 000. Required: Calculate the closing cash balance for April 2022 after taking into account the total salaries to determine if Pack West will be in a cash positive or deficit position after the salaries have been paid.
You are the financial controller of Pack West (Pty) Ltd. Your company is experiencing difficulties with their
You have the following historical information at your disposal:
Total sales were R125 000 in January, R115 000 in February, and R110 000 and R95 000 for March and April, respectively. Historical information shows that 70% of the total sales are for cash and the debtors pay as follows:
50% of the total debt one month after the sale, 30% in the following month and 20% in the third month after the sale.
The total purchases for January were R100 000, R110 000 in February, and R100 000 and R105 000 for March and April, respectively. 30% of the total purchases are paid in cash and the rest of the creditors are paid 60% in the month following the purchase, 20% in the month after that and 20% in the third month after the purchase.
Rent is R10 000 per month and the salaries stayed the same from January to April. There were no creditors and debtors outstanding at the end of December 2021 and the closing cash balance at the end of December 2021 was R150 000.
Required:
Calculate the closing cash balance for April 2022 after taking into account the total salaries to determine if Pack West will be in a cash positive or deficit position after the salaries have been paid.
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