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can someone clearly explain how the 54 days affects the payment account? i don't understand the math there. what does 54/90(60%) mean? and why times
can someone clearly explain how the 54 days affects the payment account? i don't understand the math there. what does 54/90(60%) mean? and why times the next quarter sales for this quarters payables by 40%?. Please just do the entire disbursements section with clear explanations for the payable account.
Cottonwood Inc. has estimated sales (in millions) for the next four quarters as follows: Sales for the first quarter of the year after this one are projected at $170 million. Accounts receivable at the beginning of the year were $68 million. Cottonwood has a 60-day collection period. Cottonwood's purchases from suppliers in a quarter are equal to 55 percent of the next quarter's forecast sales, and suppliers are normally paid in 54 days. Wages, taxes, and other expenses run about 22 percent of sales. Interest and dividends are $12 million per quarter. Cottonwood Inc. has estimated sales (in millions) for the next four quarters as follows: Sales for the first quarter of the year after this one are projected at $170 million. Accounts receivable at the beginning of the year were $68 million. Cottonwood has a 60-day collection period. Cottonwood's purchases from suppliers in a quarter are equal to 55 percent of the next quarter's forecast sales, and suppliers are normally paid in 54 days. Wages, taxes, and other expenses run about 22 percent of sales. Interest and dividends are $12 million per quarterStep by Step Solution
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