HW6_extrapoint

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Finance

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Apr 3, 2024

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FINA 320 Short-term Financial Planning Homework 1. Calculate the account receivable period, accounts payable period, inventory period, and cash conversion cycle for the following firms: Income Statement data: Sales 5,000 cost of goods sold 4,200 Balance Sheet data Inventory 550 Accounts receivable 110 Accounts payable 270 2. Consider the following financial statement information for the Bulldog Icers Corporation: Item Beginning Ending Inventory $ 7,281 $ 9,318 Accounts Receivable $ 4,814 $ 5,108 Accounts payable $ 6,623 $ 7,415 Net Sales $ 65,180 Cost of goods sold $ 51,912 Calculate the operating and cash cycles. How do you interpret your answer? 3. The following is the sales budget for Duck-n-Run Inc., for the first quarter of 2002: January February March Sales Budget $140,000 $162,000 $180,000 Credit sales are collected as follows: 65 percent in the month of the sale 20 percent in the month after the sale 15 percent in the second month after the sale The accounts receivable balance at the end of the previous quarter was $60,000 ($26,000 of which was uncollected December sales). a. Compute the sales for November. b. Compute the sales for December. c. Compute the cash collections from sales for each month from January through March.

4. National Beverage Company anticipates the following first quarter sales for 2015: January: $1,800,000 February: $1,600,000 March: $2,100,000 It posted the following sales figures for the last quarter of 2014: October: $1,900,000 November: $2,050,000 December: $2,200,000 The company sells 40% of its product on credit, and 60% are cash sales. The company collects credit sales as follows: 30% in the following month, 50% two months later, and 18% three months later, with 2% defaults. What are the anticipated cash inflows for the first quarter of 2015? 5. Here are some important figures from the budget of Nashville Nougats, Inc., for the second quarter of 2002 April May June Credit Sales $330,000 $372,000 $432,000 Credit purchases 132,000 150,000 185,000 Cash disbursements Wages, taxes, and expenses 20,400 22,200 25,200 Interest 9,600 9,600 9,600 Equipment purchases 70,000 84,000 0 The company predicts that 5 percent of its credit sales will never be collected, 35 percent of its sales will be collected in the month of the sale, and the remaining 60 percent will be collected in the following month. Credit purchases will be paid in the month following the purchase. In March 2002, credit sales were $210,000, and credit purchases were $156,000. Using this information, complete the following cash budget: April May June Beginning cash balance $300,000 Cash receipts Cash collections from credit sales Total cash available Cash disbursements Purchases Wages, taxes, and expenses Interest Equipment purchases Total cash disbursements Ending cash balance

6. The financial manager of Hearty Cereals is in the process of preparing a cash budget for the first quarter of 2015. The firm typically sells 1/3 of its monthly sales on cash terms and the rest on credit. An analysis of the accounts receivables shows that on average 40% of the sales are collected in the next month, 50% in 60 days, 7% in 90 days, with the rest ending up as bad debts. As the manager’s assistant it is your job to project the cash receipts for the first quarter of 2015, using the monthly sales figures listed below. 2014 Sales October $1,750,000 November $2,000,000 December $2,450,000 2015 Forecasted Sales January $1,850,000 February $1,650,000 March $1,900,000 7. Half of company ABC’s sales are cash sales and the remainder is paid for within a 1- month delay. The company pays its credit purchases with a 1-month delay. Credit purchases in January were $30, and total sales in January were $180. The table below contains the projection for the next three months. The company has a policy of keeping a minimum balance of $100 in cash. Please prepare a cash budget for ABC. February March April Total Sales 200 220 180 Cash Purchases 70 80 60 Credit purchases 40 30 40 SG&A 30 30 30 Taxes & interest 10 10 10 Capital Expenditure 100

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