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Question 3 Cash flow problem has become rampant and firm owners and managers are now particular about it. In view of this the Management
Question 3 Cash flow problem has become rampant and firm owners and managers are now particular about it. In view of this the Management of ABAVIC Ltd has requested that you help them to manage their cash flow. You are to prepare a monthly cash forecast (i.e. Budget) for the first quarter of the year 2022. Income and the Expenditure forecasts have been provided on some revenue and costs items such as sales and purchases requirements for the first quarter of the year 2022 as follows: 1) The forecast are as follows Month Sales Purchases January 250,000 C160,000 February 350,000 175,000 March C260,000 C210,000 2). Records have it that ABAVIC Ltd sells and entertain such that 60% of its sales are as liquid as cash sales (received early),25% are collected one month after sale, and the rest in the second month following the sale with no bad debt provision 3)ABAVIC. Ltd pays for 70% of its purchases in the month of purchases and the other part in the following month. 4) Labour expenses for each month is expected to equal 25% of that month's sales, with cash payment being made in the month in which the expenses is incurred. 5)General and administrative expenses of C60,000 are recognized and paid monthly. The company feels that a minimum cash balance of C2,000, should be maintained. The company rent of C45, 000 over the period is believed to be paid in March.
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