Down East Pharmaceuticals

| September 29, 2018

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 StudyA?© 2007 South UniversityDown East PharmaceuticalsSelect 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 March39.6MonthSalesEnd of June25.7January$100,000February250,000Receivables Balance:March400,000End of March$330,000April600,000End of June$300,000May450,000June300,000Aging Schedules:End of MarchEnd of JuneAssumed 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 JuneTotal90.0%90.0%MODEL-GENERATED DATA:Calculation of AverageEnd of MonthCollection Period (ACP):MarchJuneReceivables balance$330,000$300,000Average daily sales$8,333.33$11,666.67ACP39.625.7Aging Schedules:Age ofAccountEnd of MarchEnd of Junein 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 RecRemainingMonthSalesfor monthRec/SalesJanuary$100,000$00.0%February250,00050,00020.0%March400,000280,00070.0%Total$330,00090.0%End of June:Accts RecRemainingMonthSalesfor monthRec/SalesApril$600,000$00.0%May450,00090,00020.0%June300,000210,00070.0%Total$300,00090.0%

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