Finance Assignment - Down East Pharmaceuticals

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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:


    • 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 March39.6   
 MonthSalesEnd of June25.7   
 January$100,000      
 February250,000Receivables Balance:     
 March400,000End of March$330,000   
 April600,000End of June$300,000   
 May450,000      
 June300,000Aging Schedules:     
    End of MarchEnd of June   
Assumed Collection Pattern:  0 - 30:84.8%70.0%   
   30 - 60:15.2%30.0%   
Month of sale30.0%Over 60:0.0%0.0%   
One month after sale50.0%      
Two months after sale20.0%Payment Pattern:     
    End of MarchEnd of June   
   Total90.0%90.0%   
         
         
MODEL-GENERATED DATA:        
         
Calculation of Average  End of Month    
Collection Period (ACP):  MarchJune    
Receivables balance $330,000$300,000    
Average daily sales $8,333.33$11,666.67    
ACP  39.625.7    
         
Aging Schedules:        
         
Age of        
AccountEnd of MarchEnd of June    
in DaysA/R%A/R%    
         
0-30$280,00084.8%$210,00070.0%    
30-6050,00015.2%90,00030.0%    
60-9000.0%00.0%    
         
Total$330,000100.0%$300,000100.0%    
         
         
Uncollected Balances Schedules:        
         
End of March:        
   Accts RecRemaining    
 MonthSalesfor monthRec/Sales    
         
 January$100,000$00.0%    
 February250,00050,00020.0%    
 March400,000280,00070.0%    
         
  Total$330,00090.0%    
         
         
End of June:        
   Accts RecRemaining    
 MonthSalesfor monthRec/Sales    
         
 April$600,000$00.0%    
 May450,00090,00020.0%    
 June300,000210,00070.0%    
         
  Total$300,00090.0%    
       
    • 6 years ago
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