Case in point, True Religion Apparel, Incorporated Cash Receipts. To solve for the cash receipts from sales, we're going to use base analysis.

If we know the beginning and ending accounts receivable as well as the sales as we do with historical numbers, we can very easily determine the cash received by solving for that variable. For our projected results, we also need to solve for that variable of cash taken in. However, we also need the forecasted ending accounts receivable amount as well as forecasted sales.

So, in terms of our source data, the beginning accounts receivable we get from the previous balance sheet end. The new sales have to come from a sales forecast. This is typically coming from management. Again, it's often done on a monthly basis because weekly sales can be very, very difficult to calculate. Once we have a monthly forecast, we then have to convert that to weekly, which is also not easy, but we will see how to do that in a moment in our second case in point. Cash receipts, again, you can make an assumption about this but it's usually much more easily calculated. And the way we calculate that is, again, using the base analysis once we have the ending accounts receivable. So, the ending accounts receivable in a forecast, of course, can't be easily calculated if we already know the receipts but we've decided that we're going to solve for the receipts. In this case, it's much easier to make an assumption for ending accounts receivable in a given period based on their receivable days. And this is commonly done in a traditional, quarterly or annual forecast as well. Receivable days is the best predictor of cash receipts because the nature of the ratio is to look at how long it takes to collect on average for sales that are made. With a decent sales forecast, something most companies will do at least on a monthly basis, if not weekly, we can piece together the cash the company expects to receive. The important thing to remember with any of these days formulas. In this model, we're working with weeks or seven days. Occasionally, we will be working with monthly data, which has 30 or 31 days. Typically when we see this formula, it's in a quarterly or annual model, in which case, 90 or 360 or 365 days are being used. So, we have to be careful of this. If the company has an ongoing weekly cash flow model, And again, most companies don't do these ongoing in terms of in good times and in bad, but they might have one from a previous period. In that case, we would have the benefit of looking at some of these ratios historically on a weekly basis to get the correct assumption moving forward. In the case of TRA, the days receivable was at about 24 days, which makes sense. I mean, direct to consumer sales have very few days outstanding because the sales are made using credit cards and they're often settled immediately. Larger retailers, however, most likely take their time, these would be the wholesale customers. So, what is happening in the first few weeks of the forecast is we see DSO or day sales outstanding creeping up dramatically as retailers have stopped paying their bills. They're in the exact same boat as True Religion. That will have a dramatic impact on cash and we can calculate the ending accounts receivable, again, using our assumption and then using our base analysis, we can back out the cash receipts. We would then take that cash receipts just calculated and this now becomes the top line of our 13 week cash flow statement. Just note that in base analysis or roll forwards for accounts receivable as they are sometimes called, cash receipts actually makes the account receivable go down. So, accounts receivable has a beginning balance, sales make it go up, cash makes it go down. However, on the 13 week cash flow statement, we are interested in the cash flow so the cash receipts are showing up positive on our 13 week cash flow statement. And one other quick note is that like most projection models, we're not really interested in historical cash flow. Historical cash flow is obviously useful in terms of understanding trends and calculating ratios and whatnot but we tend not to spend a lot of time recalculating historical cash flows in a financial forecast, and we won't do them here as well.