Intro

It is the beginning of January. Actual sales for the previous quarter (Q4) and estimated sales for the next five quarters are as follows (in $ million):

Quarter	Q4	Q1	Q2	Q3	Q4	Q1
Sales	80	63	68	70	96	75

Your average collection period is 40 days and your average average payment period is 60 days. You expect to always spend 40% of the following quarter's sales on purchases of components from suppliers. Wages and other expenses add up to 35% of each quarter's sales.

You have to pay $4 million in interest each quarter, and plan to spend $20 million on new machinery in Q2. You start the year with $3 million in cash.

Assume that each quarter has 90 days, sales occur evenly throughout the quarter and all other cash flows occur at the end of the quarter.

Attempt 1/10 for 8.5 pts.

Part 1

Add a worksheet to your spreadsheet and label it "Collections." What fraction of each quarter's sales gets collected during that same quarter?

Submit

Attempt 1/10 for 8.5 pts.

Part 2

What fraction of the previous quarter's sales ends up as the beginning accounts receivable balance in each quarter?

Submit

Attempt 1/10 for 8.5 pts.

Part 3

Add some rows to the spreadsheet showing sales (Q4 to Q4), beginning receivable balances, current sales collected and total cash collected for Q1 to Q4. What is your expected total cash collection in (future) Q4 (in $ million)?

Submit

Attempt 1/10 for 8.5 pts.

Part 4

Add another worksheet to your spreadsheet and label it "Disbursements." What fraction of each quarter's purchases gets paid during that same quarter?

Submit

Attempt 1/10 for 8.5 pts.

Part 5

What fraction of the previous quarter's purchases ends up as the beginning accounts payable balance in each quarter?

Submit

Attempt 1/10 for 8.5 pts.

Part 6

Add some rows to the spreadsheet showing sales (Q1 to Q1), purchases (Q4 to Q4), beginning payable balances and current purchases paid for Q1 to Q4. What is your expected payment for current purchases in (future) Q4 (in $ million)?

Submit

Attempt 1/10 for 8.5 pts.

Part 7

Add some more rows to the disbursement worksheet showing wages & other expenses, interest payments and change in gross fixed assets and total cash disbursements for Q1 to Q4. What is your expected total cash disbursement in (future) Q4 (in $ million)?

Submit

Attempt 1/10 for 8.5 pts.

Part 8

Add another worksheet to your spreadsheet and label it "Cash budget". Add rows for beginning cash balance, cash collections, cash disbursements and ending cash balance for Q1 to Q4. What is your expected cash balance at the end of Q4 (in $ million)?

Submit

Attempt 1/10 for 8.5 pts.

Part 9

Company policy is to borrow just enough every quarter to prevent the cash balance from becoming negative.

Rename "Ending cash balance" to "Intermediate cash balance" on worksheet "Cash budget" and add two rows for short-term debt issuance and ending cash balance. What is the ending cash balance in Q4 (in $ million)?

Submit

Attempt 1/10 for 8.5 pts.

Part 10

The company also has a policy of repaying short-term debt as much as cash flows allow. Insert another row for debt repayment between debt issuance and ending cash balance, and add two rows for beginning debt and ending debt. What is the ending cash balance in Q4 (in $ million)?

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