(Short-Term Finance and Planning)You are hired as a financial manager and your first task is to establish the cash budget of your firm.You gathered the following information.The firm receives all income from salesSales estimates (in millions)Q1 = 1,000; Q2 = 1,250; Q3 = 1,500; Q4 = 2,000; Q1 next year = 1,200Accounts receivableBeginning receivables = $3000Average collection period = 45 daysAccounts payablePurchases = 60% of next quarter’s salesBeginning payables = 1,200Accounts payable period is 45 daysOther expensesWages, taxes, and other expense are 25% of salesInterest and dividend payments are $100A major capital expenditure of $500 is expected in the second quarterThe initial cash balance is $100 and the company maintains a minimum balance of $50

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EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 13P

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(Short-Term Finance and Planning)

You are hired as a financial manager and your first task is to establish the cash budget of your firm.

You gathered the following information.

The firm receives all income from sales

Sales estimates (in millions)
- Q1 = 1,000; Q2 = 1,250; Q3 = 1,500; Q4 = 2,000; Q1 next year = 1,200
Accounts receivable
- Beginning receivables = $3000
- Average collection period = 45 days
Accounts payable
- Purchases = 60% of next quarter’s sales
- Beginning payables = 1,200
- Accounts payable period is 45 days
Other expenses
- Wages, taxes, and other expense are 25% of sales
- Interest and dividend payments are $100
- A major capital expenditure of $500 is expected in the second quarter
The initial cash balance is $100 and the company maintains a minimum balance of $50

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