Accounting and Business Consulting

Play the liquidity game!

Are you as smart a manager as this computer? Enter your estimated additional purchase volumes and see!

Background:

1. You are a reseller of goods and have agreed monthly sales volumes with a customer for each month in the next 15.
2. In order to deliver on time, you need to purchase the goods 2 months before they are to be sold (the purchase profile is shown below).
3. You buy the goods at £5 per unit, paying 35% of the purchase price in the month of purchase, and 65% in the month thereafter.
4. You sell the goods at £8 per unit, and your typical debtor receipts are 15% paying in the month of sale, 40% in the next month, and 45% two months after sale.
5. You have a certain starting cash balance (see below), and your starting purchase and sales pattern is sufficient to leave some additional cash left over.
6. You know that you can sell everything that you buy, and you want to thus buy as much as possible whilst avoiding overtrading and running out of cash.
7. In fact, you have imposed a minimum cash balance not to dip beneath (see below).
8. Your aim is thus to see if you can guess how much additional goods to purchase in each month so that you maximise sales without running out of cash.
9. Once you have guessed your purchase pattern, submit your answers and compare your guessed purchase pattern (and cash balance) to that calculated by the algorithm of the game. See if you are as smart a manager as this machine!