(Short-Term Finance and Planning) You are hired as a financial manager and your first task is to establish the cash budget of your firm. You gathered the following information. The firm receives all...

(Short-Term Finance and Planning)

You are hired as a financial manager and your first task is to establish the cash budget of your firm.

You gathered the following information.

The firm receives all income from sales

• Sales estimates (in millions)
  
  
  
  • Q1 = 1,000; Q2 = 1,250; Q3 = 1,500; Q4 = 2,000; Q1 next year = 1,200
  
  
  
  


• Accounts receivable
  
  
  
  • Beginning receivables = $3000
  
  
  • Average collection period = 45 days
  
  
  
  


• Accounts payable
  
  
  
  • Purchases = 60% of next quarter’s sales
  
  
  • Beginning payables = 1,200
  
  
  • Accounts payable period is 45 days
  
  
  
  


• Other expenses
  
  
  
  • Wages, taxes, and other expense are 25% of sales
  
  
  • Interest and dividend payments are $100
  
  
  • A major capital expenditure of $500 is expected in the second quarter
  
  
  
  


• The initial cash balance is $100 and the company maintains a minimum balance of $50