Question 1 The table below provides a firm’s projected sales for the year 2022. About 35% of a month’s sales is collected in the same month whereas the remainder is collected in the next month. Purchases are 70% of sales and are made a month before the sales month. The firm’s average payment period (APP) is 21 days. Assume there are 30 days in a month Feb, 2022 Mar, 2022 Apr, 2022 Sales (RM) 52,000 55,000 54,000 (a) What is the total amount of sales collection in March 2022? b) What is the total amount of purchase disbursement in March 2022?
Question 1
The table below provides a firm’s projected sales for the year 2022. About 35% of a month’s sales is collected in the same month whereas the remainder is collected in the next month. Purchases are 70% of sales and are made a month before the sales month. The firm’s average payment period (APP) is 21 days. Assume there are 30 days in a month
Feb, 2022 Mar, 2022 Apr, 2022
Sales (RM) 52,000 55,000 54,000
(a) What is the total amount of sales collection in March 2022?
- b) What is the total amount of purchase disbursement in March 2022?
Question 2
Say your firm needs short-term financing. Your firm’s bank offers a reasonable sum of loan for a term of one year at the interest rate of 8% per annum. You are considering if you should factor your receivables instead. Your firm’s sales in the coming year is expected to be RM3 million, and the average collection period is estimated to be 73 days. A factor offers a discount rate of 2% for the firm’s receivables. Assume there are 365 days in a year
(a) How much can the firm obtain from factoring its receivables, and for how long?
(b) What is the cost per year to the firm if it factors its receivables continually?
(c) Should the firm take the bank loan or factor its receivables? Explain
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