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.

Paymore's cash balance at the start of the first quarter is $40 and its minimum acceptable cash balance is $30. Work out the short-term financing requirements for the firm in the coming year. The firm pays no dividends. The sales forecasts for the next five quarters are as follows:

Paymore can borrow up to $100 from a line of credit at an interest rate of 2% per quarter.

Prepare a short-term financing plan. The sales forecasts for the next five quarters are as follows:

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Quarter in Coming Year Following Year First S372.00 S 360.00 S Second Third Fourth First Quarter Sales forecast 336.00S 384.00 S 384.00 Order size Payment in current Payment in next Collection in current Collection in next Sales in last Labor and administrative e Interest on long-term debt 75.00% of sales forecast the next er 2/3 1/3 1/3 2/3 S 336.00 S 65.00 S 40.00 S 40.00 S 30.00 S 100.00 2.00% er er er er er er er cash balance acceptable cash balance Minimum Borrowing lmit Interest rate er Cash Budget Quarter First Second Third Fourth Sources of cash Collections on accounts receivable S 348.00 S 368.00 S352.00 S 352.00 Uses of cash Payments of accounts payable Labor & administrative expenses Interest on long-term debt 288.00 65.00 40.00 S393.00 S (41.00) 273.00 258.00276.00 65.00 40.00 363.00 S381.00 65.00 40.00 65.00 40.00 Total uses of cash Net cash inflow S 378.00 S 30.00)s 5.00 S(29.00) Short-term financing requirements Quarter First Second Third Fourth Sources of cash Cash at start of period Net cash inflow Cash at end of period Minimum operating cash balance Cumulative financing required S 40.00 S (30.00) 10.00 30.00 S 20.00 S 10.00S 15.00 5.00(29.00) 15.00 (14.00) 30.00 15.00 S 44.00 S (14.00) 41.00) (55.00) 30.00 S 85.00 30.00