Paymore Products places orders for goods equal to 75% of its sales forecast in the next quarter.
Question:
Paymore Products places orders for goods equal to 75% of its sales forecast in the next quarter. Paymore's cash payments to its suppliers are under the assumption that the firm pays for its goods with a 1-month delay. Therefore, on average, two-thirds of purchases are paid for in the quarter that they are purchased, and one-third are paid in the following quarter.
Paymore's customers pay their bills with a 2-month delay. Therefore, on average, one-third of sales are collected in the quarter that the sales were made, and two-thirds are collected in the following quarter.
Assuming that the sales in the last quarter of the previous year were $336, labor and administrative expenses are $65 per quarter, and interest on long-term debt is $40 per quarter, work out the net cash inflow for Paymore for the coming year?
The sales forecasts for the next five quarters are as follows:
Step by Step Answer:
Fundamentals of Corporate Finance
ISBN: 978-0078034640
7th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus