Question
Paymore Products places orders for goods equal to 75% of its sales forecast in the next quarter which has been provided in the below table.
Paymore Products places orders for goods equal to 75% of its sales forecast in the next quarter which has been provided in the below table.
Quarter in Coming Year | Following Year | ||||
---|---|---|---|---|---|
First | Second | Third | Fourth | First Quarter | |
Sales forecast | $ 404 | $ 336 | $ 344 | $ 392 | $ 392 |
Paymores labor and administrative expenses are $73 per quarter and interest on long-term debt is $48 per quarter. Paymores cash balance at the start of the first quarter is $40 and its minimum acceptable cash balance is $30. Assume that Paymore can borrow up to $344 from a line of credit at an interest rate of 2% per quarter. On average, one-third of sales are collected in the quarter that they are sold, and two-thirds are collected in the following quarter. Assume that sales in the last quarter of the previous year were $344. On average, two-thirds of purchases are paid for in the quarter that they are purchased, and one-third are paid in the following quarter. Prepare a short-term financing plan using the above table.
Note: Leave no cells blank. Enter '0' when necessary. Negative amounts should be indicated by a minus sign. Round order, payment, and collection calculations to the nearest whole number. Enter your answers in the Table in millions of dollars, rounded to 2 decimal places.
(figures in $ millions | Quarter | |||
First | Second | Third | Fourth | |
A. Cash requirements | ||||
Cash required for operations | ||||
Interest on bank loan | ||||
Total cash required | ||||
B. Cash raised in quarter | ||||
Line of credit | ||||
Total cash raised | ||||
C. Repayments of bank loan | ||||
D. Addition to cash balances | ||||
E. Line of credit | ||||
Beginning of quarter | ||||
End of quarter |
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