o establish the cash budget of your firm. You gathered the following information:

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter4: Financial Planning And Forecasting
Section: Chapter Questions
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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)
* Quarter1 = 1,000; Quarter2 = 1,250; Quarter3 = 1,500; Quarter4 = 2,000; Quarter1 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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