Let's move on to the inventory roll forward in which we will be calculating the purchases of materials. And then this will lead us directly into the accounts payable roll forward where we will calculate the payments to suppliers. Inventory is directly linked to cost of goods sold on the income statement. As goods are purchased, both materials and finished goods for sale inventory increases. As they're sold, which is the cost of goods sold inventory decreases. We have on the income statement, estimate or projected amount for cost of goods sold. Since we have cost of goods sold broken down into labor and materials, we know that the materials portion of cost of goods sold will affect our inventory. Now in practice, calculating the cost of goods sold as well as inventory, is cost accounting, and this is very complicated. The value of your goods sold also includes the value of labor, including benefits, utilities, things like that, we are not, again, trying to replicate the work of cost accountants, but rather isolate as best we can, value of the materials bought and sold for cashflow purposes. We will do the same in a moment, to wages and salaries paid as well as other accrued expenses. Similar to accounts receivable, we will look back at the historical inventory days on hand to determine the best way to forecast that ending balance. We will use cost of goods sold materials data from the weekly income statement. And then we're gonna forecast the ending inventory balance and then back solve to get our inventory purchased amount.

The inventory days, if we look at that, this is our historical amount if we go back to the previous cashflow period. And if we were to look at our monthly roll forward amount, we have the same calculation here. We don't have the monthly days but if we look at the historical days, trailing both weekly, monthly, or four week period and then quarterly period, we'll see that it's very high. Now it's high for probably a couple of reasons. One is that we discussed earlier, true inventory on the books, reflects other costs. Our inventory, which comes from the balance sheet, has been calculated including all of those costs, labor, utilities and whatnot. However, our days ratio here is being calculated using only the cost of goods sold, materials portion. So the days ratio is likely overstating it, right? 'Cause the days ratio includes cost of goods sold. Is this a problem? Well it's not a problem for us because as long as we're consistent and the ratio is consistent, historically and our assumption is consistent going forward it's not gonna be a problem. This is the way we've chosen to break the numbers down. Obviously, we wouldn't wanna go running around saying oh my God, their days are, all of a sudden extremely high because it's not exactly going to be consistent with what's happening here. Secondly, the reason is that this number is somewhat higher because of the global recession in food service and travel business due to the pandemic that's going on at the time when this case is happening. So we just need to keep it in line with recent weeks to get the appropriate numbers. Again, we'll do this the same way as we did the accounts receivable, where our ending inventory is going to become our beginning balance. We're solving for the purchases of materials. So cost of goods sold which is going to be the decrease in the inventory balance is going to come from our weekly income statement. We wanna make sure we get only the materials portion of it 3,406.5. And then our ending balance is going to be the inventory days, times the cost of goods sold. And we need to flip that back to positive here divided by seven days in the period. And that gets us our ending inventory balance. And now I can go ahead and solve for my purchases of materials, which is going to be my ending inventory minus the beginning balance of the inventory net of the inventory sold. So here I'm adding it because it's a negative and that gets me 9,850.8.

Again, inventory went up by purchases, went down by sales and that gives me my ending balance. So I'm going to copy these across and I'll have my inventory. Now what I can do here is I can take my purchases of materials and I can go ahead and calculate the actual cash that was spent buying raw materials or finished goods inventory. I go to my accounts payable and I do the same exact thing. I take a look at again, what's happening here. Again, the accounts payable is also linked to cost of goods sold, Cost of goods sold, we have truncated the cost of goods sold account into labor and materials. As a result our payable days ratios are gonna be slightly inflated and that is showing that we're not paying our suppliers for like four months. Probably isn't exactly happening that way, although again, because of the pandemic the payments to suppliers have been delayed. So we're gonna go ahead and take the trailing seven day ratio, which is 120 days. We're going to use that for consistency and we will calculate our ending accounts payable balance. So the beginning balance is simply the ending from the previous period, purchases of material we have from up, top from our inventory calculation. And now we simply need to calculate the accounts payable ending balance which is going to be the payable days times the cost of goods sold material, which again we can use from above, in the inventory section. And we'll reverse that to make it positive. And then we'll divide by seven. And that gives us our ending balance for accounts payable. Now we will simply take our ending balance and subtract the sum of the beginning balance plus the purchases. And that tells us how much we actually had to pay to our suppliers in period one. We purchased about 9,850 of materials. And in order to get to our expected ending balance of 58,397, that means we had to pay off almost the same amount that we purchased 9,168. And these are estimates We don't know if these are actually going to happen or not. This is just like a normal forecast but based on our assumptions this is what we can expect to have, to have on hand in terms of our cash. We need to make sure that we have at least that much on hand to pay off suppliers.