Firm sales for July are projected as $100,000. The sales in May and June were $60,000 and $75,000 respectively. The firm's collection during month of sales id 15%, during month after sales is 65% and during two months after sales is 20%. The firm offers a 3% incentive to pay during month of sales. Further, firm applies a bad debt loss of 10% two months after sale (June Sales). What is the expected cash collection for the month of July a. $75,750 b. 74100 c. $100,000 d. $$97,000 e. None of the above

Firm sales for July are projected as $100,000. The sales in May and June were $60,000 and $75,000 respectively. The firm's collection during month of sales id 15%, during month after sales is 65% and during two months after sales is 20%. The firm offers a 3% incentive to pay during month of sales. Further, firm applies a bad debt loss of 10% two months after sale (June Sales). What is the expected cash collection for the month of July a. $75,750 b. 74100 c. $100,000 d. $$97,000 e. None of the above

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 10P

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Concept explainers

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.

Question

Firm sales for July are projected as $100,000. The sales in May and June were $60,000 and $75,000 respectively. The firm's collection during month of sales id 15%, during month after sales is 65% and during two months after sales is 20%. The firm offers a 3% incentive to pay during month of sales. Further, firm applies a bad debt loss of 10% two months after sale (June Sales). What is the expected cash collection for the month of July

a.

$75,750

b.

74100

c.

$100,000

d.

$$97,000

e.

None of the above

Definition Definition Receivable amount that a company is owed, but did not receive, and which may not be receivable in future.

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