1. Explain briefly the difference between Operating Cycle and the Cash Cycle (5 Marks)

1. The ABC Corporation's purchases from suppliers in a quarter are equal to 65 percent of the next quarter's forecasted sales. The payables period is 60 days, while the average collection period is 30 days. The opening receivables and opening payables are $350 and $150 respectively. Wages, taxes, and other expenses are 16 percent of sales, and interest and dividends are $60 per quarter. A major capital expenditure of $250 is expected in the third quarter. Sales for the first quarter of the following year are projected at $720. The initial cash balance is $180, and the company maintains a minimum balance of $150 The projected quarterly sales are:

Q1 Q2 Q3 Q4

Sales $690 $660 590 $560

Using the above information prepare cash budget for ABC Corporation (15 Marks)