The cash flow analysis of Mountain Village Clinic is based on the financial Exhibit between 2013 and 2014, from the month of November 2013 to August 2014. However, the analysis focuses on the period between January and June, which is the targeted budget period.
The clinics major source of finance is from the billings from injury patients, which varies during different months of the year, with the pick seasons being between the months of December through to March. The budget, which is to be restricted between January and June, 2014, will partly fall on the peak seasons, during which the clinic will be at its maximum operation or performance, while the last half of the period will fall under low season.
The projected cash flow for the period of January through to June is thereby provided as follows:
Projected Statement of Cash Flows
For the period ending 30st June from 1st January, 2014.
30st June, 2014
Cash flow from operating activities Short-term loans received --
Payment for short-term loan --
Fixed general and administrative expenses @ 30,000 per month (180,000)
Receipts from customers (Billings) 1,525,000
Payments to suppliers (228,750)
Miscellaneous expenses @ $10,000 per month (60,000)
Payments to employees (Clinical labor costs) (810,000)
Taxes paid --
Other cash flows from operating activities --
Net cash flows from operating activities 246,250
Investment activities Purchase of non-current assets (X-ray Machine) (125,000)
Net cash-flow from investment activities -$125,000
Financial activities Long-term loans received (not within the period) --
Repayments of long-term and bank loans (64,752)
Lease obligations @ $12,000 per month (72,000)
Net cash flows from financing activities -136,752
Cash and equivalent, beginning of period 50,000
Cash and equivalent, end period 34,498
Minimum operating cash balance (start and end period) 50,000
Table 1: Mountain Village Clinic Cash Flow Analysis
Table analysis from January to June:
Fixed general and administrative expenses @ 30,000 per month: (30,000 X 6) = $180,000
Receipts from customers (Billings): January = 350,000; February = 450,000; March = 300,000; April = 150,000; May = 100,000; June = 175,000.
The total billings for 6 months = (350,000 + 450,000 + 300,000 + 150,000 + 100,000 + 175,000) = $1,525,000.
Payments to suppliers: Which is 15% of the total Billings; (0.15 X 1,525,000) = $228,750.
Miscellaneous expenses @ $10,000 per month: Which remains at the same rate each month for 6 months; (10,000 X 6) = $60,000.
Payments to employees (Clinical labor costs for Physicians and other Clinical employees): Which run at $150,000 per month during the high season months, but drops to $120,000 per month during the remaining low season months.
150,000 during peak/high season months of January, February, and March; 150,000 X 3 = 450,000
120,000 during the remaining low season months of April, May, and June; 120,000 X 3 = 360,000
The total both high season and low season for all the 6 months: (450,000 + 360,000) = $810,000
Purchase of non-current assets: Only one permanent asset will be purchased during the period between January to June, which is an X-ray Machine = $125,000.
Repayments of long-term and bank loans: There is scheduled to be $64,752 for the months of March and September, but only one payment of March is scheduled to fall within the budget period.
Lease obligations @ $12,000 per month: Remains constant for the whole 6-month period: (12,000 X 6) = $72,000.
And finally, a Minimum operating cash balance; which remains constant at the bank all through the 6 months from January to June; (start and end period) = $50,000
From the cash flow analysis table above, Mountain Village Clinic displays a mismatch of income and expenditure, since the ending periods cash and equivalent is lower than that of the start of the period, assuming the starting cash was $50,000 at the bank. It might not necessarily indicate any loss, but simply a mismatch in cash flow and financial operations. The Mountain Village Clinic thereby deserves a minimum monthly line-of-credit (short-term loans) of approximately $16,000 to $20,000 from the First Bank of Aspen in order to maintain their operations effectively and conveniently.
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