Cashflow Analysis

In this report, first of all, I am going to analyze the situation of cash flows in Norton Company through four sheets (details in Excel) consisting of cash receipts schedule form December in 2014 to June in 2015; cash payments schedule form December in 2014 to June in 2015; cash flow statement form December in 2014 to June in 2015 and cash flow budget for the first half of the year in 2015. Then, according to these financial statements and data, I would push forward some recommendations.

From sheet 1 ‘Cash Receipts Schedule of Norton Company form December in 2014 to June in 2015’, it can be obviously seen that when this company adopts new credit policies, which are expected to result in collections of 60 percent in the month of sales, 20 percent in the next month and 10 percent are collected two months after sale in the budget year of 2015. The amounts of cash receipts on a month by month basis increase gradually for the period from 1st January to 30th June of the year in 2015. Therefore, the total amount to be collected from the customers (Account Receivables) would be $221,400 as at 30 June 2015.

From sheet 2 ’Cash Payments Schedule of Norton Company form December in 2014 to June in 2015’, regarding to this company’s original way of cash payments, it has easily shown that the salaries, selling and administrative expenses and bank interest are paid respectively by three accounts of fixed amounts in each month in the first half of the year in 2015. On the whole, the amounts of cash payments are steady, except for the months from March to April which need to spend company’s majority of cost in order to purchase some office supplies.

From sheet 3 ‘Cash Flow Statement of Norton Company form December in 2014 to June in 2015’, it reflects that the situation of cash flows for the period from 1st January to 30th April in the first half of the year 2015 still exists the problem of cash flow shortages. Although Norton Company has borrowed $200,000 from the bank on...