Paymore Products places orders for goods equal to 80% of its sales forecast in the next quarter. The sales forecasts for the next five quarters are as follows: |
Quarter in Coming Year | Following Year | ||||
First | Second | Third | Fourth | First Quarter | |
Sales forecast | $550 | $540 | $520 | $560 | $560 |
The firm pays for its goods with a 1-month delay. Therefore, on average, three-fourths of purchases are paid for in the quarter that they are purchased, and one-fourth are paid in the following quarter. |
Paymore’s customers pay their bills with a 2-month delay. Therefore, on average, two-fourths of sales are collected in the quarter that they are sold, and two-fourths are collected in the following quarter. Assume that sales in the last quarter of the previous year were $520. |
Paymore’s labor and administrative expenses are $60 per quarter and that interest on long-term debt is $58 per quarter. |
Suppose that Paymore’s cash balance at the start of the first quarter is $35 and its minimum acceptable cash balance is $60. Work out the short-term financing requirements for the firm in the coming year. The firm pays no dividends. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.) |
Quarter | |||||||||||||||||||
First | Second | Third | Fourth | ||||||||||||||||
Sources of cash | |||||||||||||||||||
Cash at start of period | $ | [removed] | $ [removed] | ||||||||||||||||
Net cash inflow | |||||||||||||||||||
Cash at end of period | |||||||||||||||||||
Minimum operating cash balance | |||||||||||||||||||
Cumulative financing required |