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

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

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter6: Managing Cash Flow

Section: Chapter Questions

Problem 1EP

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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 1) Required: establish the cash budget of the firm.
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