Dr Nazifa's Sent Question.

Q:You are the financial manager of a rural health centre.The director of the health centre has asked you to prepare cash flow forcasts for the next four months.He is worried that the centre has insufficient funds in its bank account to cover the cost of the building an extension.The centres only source of income is from providing health services to local population on a fee for servics basis.Patients do not always settle their bills at the time of treatment.Experience has shown that 60% of the payments are received in the month following treatments.The remaning 10% are received in the second month after treatment. Expenditure at the health centre consists of salaries and other costs (drugs, supplies and other running costs).Salaries are paid on the last friday of the month and monthly expenditure on salariesis currently $22,000.All staff receive a 10% pay rise on the 1 May. Income is estimate as$33,000 for January and $31,000 for February. Expenditure(other costs) is estimate as $4500 for February. Apart from salaries, other costs for 4 months is shown below.

MONTHS INCOME($) EXPENDITURE (OTHER COSTS) ($)

March = 30,000 4000
April = 32,000 4000
May = 33,000 3000
June = 31,000 3000
Prepare a Cash Flow Statement for March to June in the table given below. The Operating Cash Balance on 1st March is 4250 US $.
MARCH APRIL MAY JUNE
Starting Balance
Cash flow from
Operation

Addition

Subtraction

Cash Flow from
Investing

Additons
1
2
3

Subtractions
1
2
3

Cash flow from
Financing

Additions

Subtractions
Closing Cash Balance

Solution

1. Cash flow for March

Cash Coming from January income, 33000(10 %) =3300

Cash Coming from February income .31000 (60%) = 18600

Cash Coming from March income 30000 (30 %) = 9000

Salaries = (22000)

Other expenses = (4000)

2. Cash flow for April

Cash Coming from February income, 31000 (10 %) = 3100

Cash Coming from March income 30000 (60 %) = 18000

Cash coming From April = 32000 (30%) = 9600

Salaries = (22000)

Other expenses = (4000)

3. Cash flow for May

From March 30000 (10%) = 3000

From April 32000(60%) = 19200

From May 33000 (30%) = 9900

Salaries 22000x10 % increase = (24200)

Other expenses for May = (3000)

2. Cash flow for June

From April 32000 (10%) = 3200

From May 33000 (60%) = 19800

From June 31000 (30%) = 9300

Salaries 22000x10 % increase = (24200)

Other expenses for June =3000

Total Additions =126000

Total Subtractions = 106400

Net Resultant Cash from operating Activities =19600

Cash from Investing activities = 0

Cash from financing activities =0

Cash at the start 4250

Closing Balance =

Net Cash from operations +Starting balance

=19600 + 4250 =23850

Thank you for solving the question.

You Wel Come!