Cash Forecasting – NBC Institute

PM – May 2024 – L2 – SB – Q4 – Environmental and Social Performance Management

Forecast sales with seasonality adjustments and regression analysis to produce cash forecasts.

Question

Some time ago Robert launched a new product. At first, sales were good, but now the figures are causing concern. Robert wants a more accurate sales forecast to produce detailed cash forecasts.

Since there is some seasonality present in the raw data, the series for sales shown below represents the underlying trend based on an averaging process:

On average, quarters 1 and 3 are 5% and 6% respectively above trend, while quarters 2 and 4 are respectively 2% and 9% below trend.

Some preliminary calculations on the above ten observations have been carried out and the results are summarized below:

Required:
a. Forecast the sales for the next two years, adjusting for seasonality. (12 Marks)
b. Discuss the importance of seasonality adjustments in sales forecasting. (4 Marks)
c. Explain how Robert could use the sales forecasts to produce detailed cash forecasts. (4 Marks)

Answer

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Tags: Cash Forecasting, Regression, Sales Forecasting, Seasonality, Trend Analysis
Level: Level 2

Topic: Environmental and Social Performance Management
Series: MAY 2024

PSAF – May 2017 – L2 – Q3a – Public sector fiscal planning and budgeting

This question involves preparing a cash forecast for a public hospital for the first quarter of 2017 and advising on financing options.

Question

KTM Regional Hospital is a public referral hospital under Ghana Health Services established in 1980. The hospital is a sub-vented organization that finances its operations from Internally Generated Revenues (IGR) and government subventions. In order to forecast for the first quarter of 2017, you are provided with the following information on revenues and expenditure projections of the Hospital for the fourth quarter of 2016 and first quarter of 2017.

Month	IGR (GH¢ ‘000)	Subvention (GH¢ ‘000)	Donations (GH¢ ‘000)	Non-Established Post (GH¢ ‘000)	Goods and Services (GH¢ ‘000)	Non-Financial Assets (GH¢ ‘000)	Other Expenditure (GH¢ ‘000)
October 2016	2,000	8,000	200	300	700	1,200	120
November 2016	2,400	–	–	310	740	–	240
December 2016	2,500	–	100	400	900	1,000	125
January 2017	3,000	10,000	500	600	800	–	130
February 2017	3,200	–	700	820	1,600	–	150
March 2017	3,400	–	900	800	840	–	290

Additional Information:

The cash and bank balance of the Hospital as at December 2016 was a deficit of GH¢500,000.
Breakdown of IGR:
- National Health Insurance Customers (60% of IGR) pay two months after service.
- Corporate Customers (20% of IGR) have one-month credit terms.
- Cash Customers (20% of IGR) pay immediately.
Government subvention is released in two equal instalments in the second and third month of each quarter.
Donations for March 2017 (GH¢900,000) will be received 40% in cash and 60% in kind.
Non-established post refers to wages and salaries for casual and contract workers, paid in the month incurred.
Goods and services are paid 40% in the month incurred and 60% in arrears.
Non-financial assets are paid for in four equal instalments starting from the month of purchase.
Other expenses are paid as and when incurred.

Required:

i) Prepare a cash forecast for the Hospital for the first quarter of 2017, showing the forecast for each month and that of the quarter as a whole. (12 marks)

ii) On the basis of the cash forecast in (i) above, advise management on the financing options available to them for the 2017 fiscal year. (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budgeting, Cash Flow Management, Cash Forecasting, Hospital Finance, Public Sector
Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: MAY 2017

PM – May 2024 – L2 – SB – Q4 – Environmental and Social Performance Management

Forecast sales with seasonality adjustments and regression analysis to produce cash forecasts.

Question

Some time ago Robert launched a new product. At first, sales were good, but now the figures are causing concern. Robert wants a more accurate sales forecast to produce detailed cash forecasts.

Since there is some seasonality present in the raw data, the series for sales shown below represents the underlying trend based on an averaging process:

On average, quarters 1 and 3 are 5% and 6% respectively above trend, while quarters 2 and 4 are respectively 2% and 9% below trend.

Some preliminary calculations on the above ten observations have been carried out and the results are summarized below:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cash Forecasting, Regression, Sales Forecasting, Seasonality, Trend Analysis
Level: Level 2

Topic: Environmental and Social Performance Management
Series: MAY 2024

PSAF – May 2017 – L2 – Q3a – Public sector fiscal planning and budgeting

This question involves preparing a cash forecast for a public hospital for the first quarter of 2017 and advising on financing options.

Question

Month	IGR (GH¢ ‘000)	Subvention (GH¢ ‘000)	Donations (GH¢ ‘000)	Non-Established Post (GH¢ ‘000)	Goods and Services (GH¢ ‘000)	Non-Financial Assets (GH¢ ‘000)	Other Expenditure (GH¢ ‘000)
October 2016	2,000	8,000	200	300	700	1,200	120
November 2016	2,400	–	–	310	740	–	240
December 2016	2,500	–	100	400	900	1,000	125
January 2017	3,000	10,000	500	600	800	–	130
February 2017	3,200	–	700	820	1,600	–	150
March 2017	3,400	–	900	800	840	–	290

Additional Information:

The cash and bank balance of the Hospital as at December 2016 was a deficit of GH¢500,000.
Breakdown of IGR:
- National Health Insurance Customers (60% of IGR) pay two months after service.
- Corporate Customers (20% of IGR) have one-month credit terms.
- Cash Customers (20% of IGR) pay immediately.
Government subvention is released in two equal instalments in the second and third month of each quarter.
Donations for March 2017 (GH¢900,000) will be received 40% in cash and 60% in kind.
Non-established post refers to wages and salaries for casual and contract workers, paid in the month incurred.
Goods and services are paid 40% in the month incurred and 60% in arrears.
Non-financial assets are paid for in four equal instalments starting from the month of purchase.
Other expenses are paid as and when incurred.

Required:

i) Prepare a cash forecast for the Hospital for the first quarter of 2017, showing the forecast for each month and that of the quarter as a whole. (12 marks)

ii) On the basis of the cash forecast in (i) above, advise management on the financing options available to them for the 2017 fiscal year. (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budgeting, Cash Flow Management, Cash Forecasting, Hospital Finance, Public Sector
Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: MAY 2017

Question Tag: Cash Forecasting

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PM – May 2024 – L2 – SB – Q4 – Environmental and Social Performance Management

Forecast sales with seasonality adjustments and regression analysis to produce cash forecasts.

PSAF – May 2017 – L2 – Q3a – Public sector fiscal planning and budgeting

This question involves preparing a cash forecast for a public hospital for the first quarter of 2017 and advising on financing options.

PM – May 2024 – L2 – SB – Q4 – Environmental and Social Performance Management

Forecast sales with seasonality adjustments and regression analysis to produce cash forecasts.

PSAF – May 2017 – L2 – Q3a – Public sector fiscal planning and budgeting

This question involves preparing a cash forecast for a public hospital for the first quarter of 2017 and advising on financing options.

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PM – May 2024 – L2 – SB – Q4 – Environmental and Social Performance Management

Forecast sales with seasonality adjustments and regression analysis to produce cash forecasts.

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PSAF – May 2017 – L2 – Q3a – Public sector fiscal planning and budgeting

This question involves preparing a cash forecast for a public hospital for the first quarter of 2017 and advising on financing options.

You're reporting an error for "PSAF – May 2017 – L2 – Q3a – Public sector fiscal planning and budgeting"

PM – May 2024 – L2 – SB – Q4 – Environmental and Social Performance Management

Forecast sales with seasonality adjustments and regression analysis to produce cash forecasts.

You're reporting an error for "PM – May 2024 – L2 – SB – Q4 – Environmental and Social Performance Management"

PSAF – May 2017 – L2 – Q3a – Public sector fiscal planning and budgeting

This question involves preparing a cash forecast for a public hospital for the first quarter of 2017 and advising on financing options.

You're reporting an error for "PSAF – May 2017 – L2 – Q3a – Public sector fiscal planning and budgeting"

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