Template for the Cash Flow Scenario



No one can predict the future, but accountants and financial managers must try and do exactly that!? By examining net revenue, costs, and cash flow, you can get a clearer picture of what to expect in your organization’s (or one with which you are familiar) fiscal future. Using these metrics to look forward will enable you to more effectively plan budgets that accomplish organizational goals. In this Assignment, you address three scenarios. One scenario focuses on net revenue, another revolves around fixed and variable costs, and the third presents information on cash flow. You will use the information provided in the scenarios to answer questions and explore how net revenue, fixed and variable costs, and cash flow impact the ability of an organization to provide services. You will also consider the different categories of costs. A Work template is provided as an example. You will need to put create this template in Excel and add the necessary values and calculations.Note: For those Assignments in this course that require you to perform calculations you must:Create an Excel spreadsheet containing the information provided. Template in Word is provided.Show all your work.Answer any questions included with the problems (as text in the Excel spreadsheet).For those not comfortable with the use of Microsoft Excel, this week’s Optional Resources suggest several tutorials.To prepare: Review the information in this week’s Learning Resources (including the Media) dealing with net revenue, fixed and variable costs, and cash flow and how they are used in financial decision making.Carefully examine the information in each of the three scenarios below and consider how calculations using this information can be used to answer the questions asked.This Assignment will be due by Day 7 of Week 5. Be sure and include all of your calculations. Net Revenue ScenarioYour clinic provides four kinds of services:Comprehensive initial medical consultation is priced at $250Established patient limited visit is priced at $75Established patient intermediate visit is priced at $125Established patient comprehensive visit is priced at $250Question: The profile of your patients is such that the average collection rate is 75%. Assuming you have 100 visits of each type each month, what amount of new revenue will you generate in the next 12 months?Template for the Net Revenue ScenarioTa??Annual VolumeGross Revenue??Type of ServicePrice EachComprehensive initial medical consultant???Established patient limited visit???Established patient intermediate visit???Established patient comprehensive visit???Total Gross Revenue???Average Collection Rate???Total Net Revenue???Fixed/Variable Cost ScenarioYou have performed a cost analysis of your health service organization and have determined the following: based on the latest three years of information, your annual cost of operations is $1,600,000 with annual volume of 10,000 procedures. You have determined that certain of your supply items are fixed in nature (those marked with an F) while others are variable (marked with a V).Cost ItemsF/VAverage Annual AmountCost ItemsF/VAverage Annual AmountSupply item 1F$220,000Supply item 6F50,000Supply item 2F180,000Supply item 7V500,000Supply item 3F75,000Supply item 8V300,000Supply item 4F50,000Supply item 9V200,000Supply item 5F25,000Total1,600,000Question: An insurance company that is considering directing its 1,000 units per year of procedure business to your organization has approached you. Your board has mandated that you make $5 of profit from each of the procedures. You obviously want the highest possible price, but as you enter the negotiations, what is the lowest possible price you would be willing to accept from this payer?Hint: Calculate the variable cost.Template for the Fixed/Variable Cost ScenarioSupply ItemTotalVariableFixedSupply Item 1Supply Item 2Supply Item 3Supply Item 4Supply Item 5Supply Item 6Supply Item 7Supply Item 8Supply Item 9 TotalAnnual VolumeVariable Cost per UnitProfit TargetTotalCash Flow ScenarioYour new business venture will begin operation on July 1, 20X2. You will hire staff effective January 1, 20X2 with a cost of $40,000 per month. You know from experience that collections lag billing by 3 months (in other words, once you bill for a service, you must wait 90 days for the payment to be received. Your business volume is projected to be as follows:MonthVolumeBillingJuly, 20X21,000$100,000August1,000$100,000September1,000$100,000October1,000$100,000November1,000$100,000December1,000$100,000January, 20X31,000$100,000February1,000$100,000March1,000$100,000April1,000$100,000May1,000$100,000June1,000$100,000Question: If you have $380,000 of cash on hand January 1, 20X2, how much cash will you have at the end of June 20X3? Assume a 100% collection rate.Template for the Cash Flow ScenarioMonthOpeningCash BalanceMonthly ExpenseMonthly BillingMonthly CollectionsEnding Cash BalanceJanuary 20X2$380,000$40,000$340,000February$340,000MarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecemberJanuary 20X3FebruaryMarchAprilMayJune ................
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