Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribedcan 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 quarter

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Theoretical Foundations For Quantitative Finance

Authors: Luca Spadafora, Gennady P Berman

1st Edition

9813202475, 978-9813202474

More Books

Students also viewed these Finance questions