Cash Flow Forecasting

Cash flow forecasting of financial statements

117

to project inventory for 2004, the calculation would be:

2004 2005 2006 2007 2008

DOH *172.14/365 *172.14/365 *172.14/365 *172.14/365 *172.14/365

Inventory 201,042

DOH

Try working out the inventory for years 2005 onwards.

Accounts receivable turnover

You can use the same approach outlined in the inventory example above

to project accounts receivable. Once you have taken an average or

agreed on a days receivable figure, you will want to derive a pro forma

figure for each of the years you are projecting.

Example

Once again, adapting the accounts receivable in days ratio, the formula

to calculate the projected level of receivables is:

(Net sales*receivables DOH)/365  projected receivables

FACT SHEET 2000 2001 2002 2003 2004

AR DOH 38 74 57 53 #N/A

Average AR DOH  55.50 days.

Using our spreadsheet data,

2004 2005 2006 2007 2008

Net sales €639,120 €677,467 €718,115 €761,202 €806,874

H6136-Ch04.qxd 9/8/05 5:34 PM Page 117