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Thomas is anticipating a decrease in his business' sales for next year. He is constructing a Cash Collections Budget to see if he has enough
Thomas is anticipating a decrease in his business' sales for next year. He is constructing a Cash Collections Budget to see if he has enough cash flow to continue paying his employees. In order for Thomas to keep his employees, he would need Total Cash Collections for each quarter to be more than $100,000. Thomas's Accounts receivable balance from the prior year is $30,000, his Quarter 1 sales are $90,000, his Quarter 2 sales are $170,000, his Quarter 3 sales are $80,000, and his Quarter 4 sales are $95,000. Assuming 85% of sales is collected in the quarter in which it was earned and 15% is collected in the following quarter, will he have enough to keep his employees? No, his Total Cash Collections from Quarter 1 are too low. No, his Total Cash Collections from Quarter 4 are too low. No, his Total Cash Collections from Quarter 3 are too low. Yes, he will have enough Total Cash Collections to hire the part-time employee
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