Information Using the following information based on expected sales to forecast
ID: 2800592 • Letter: I
Question
Information Using the following information based on expected sales to forecast the monthly cash collections, accounts receivable balance, monthly cash disbursements, net cash flows, and cash surplus/ deficit at the end of each month in the fourth quarter of 2017 (October - December 2017). Do not allow your firm to have a cash balance below the minimum cash balance and only borrow what you need. ALL SALES ARE MADE ON CREDIT a. In September 2017, sales were $50,000. b. The firm's total sales in 2016 were $2,028,000. The firm's accounts receivable balance on December 31, 2015 was $35,000. The firm's accounts receivable balance on December 31, 2016 was $65,000. c. Accounts payable are 60% of sales d. Operating expenses are 10% of sales e. The firm plans to purchase equipment in October costing $125,000 f. Beginning Cash Balance in October $25,000 g. Minimum Cash Balance $5,000 h. Assume there is an annual interest rate of 18% on short term debt and that the firm starts with no short term borrowing. i. Sales are expected to be $40,000 for October 2017, $400,000 for November 2017, and $100,000 for December 2017.Explanation / Answer
Answer:- Firms total cash disbursements for the month of October:-
Sales in October month = $ 40000
Accounts payable 60% of sales = 40000 x60/100 = 24000
Operating expenses 10 % of sales = 40000 x 10/100 = 4000
cost of purchase of equipment =125000
Total cash disbursements for oct month = 153000