FUND.OF CORP.FINANCE PKG. F/BU >C<
FUND.OF CORP.FINANCE PKG. F/BU >C<
16th Edition
ISBN: 9781323165997
Author: Berk
Publisher: PEARSON C
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Chapter 9, Problem 9P
Summary Introduction

Pro-forma earnings: Pro-forma earnings are computed after deducting all the expenses from the revenues. Subtracting all the expenses from the revenue results the amount which is called as net income or earning after tax.

Pro-forma free cash flow: Pro-forma free cash flow measures the ability of the firm to generate positive cash flow for smooth operation of the business.

To determine:

Pro-forma earnings and Pro-forma free cash flow

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Ned's Co. has an average collection period of 45 days and an operating cycle of 130 days. It has a policy of keeping at least $10 on hand as a minimum cash balance, and has a beginning cash balance for the first quarter of $20. Beginning receivables for the quarter amount to $35. Sales for the first and second quarters are expected to be $110 and $125, respectively, while purchases amount to 80% of the next quarter's forecast sales. The accounts payable period is 90 days. What are the cash disbursements for the first quarter?   Question 4 options:   $92   $88   $76   $100   $110
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