Question

Paymore Products places orders for goods equal to 75% of its sales forecast in the next quarter which has been provided in the below table. Quarter in Coming Year Following Year First Second Third Fourth First Quarter Sales forecast $372 $360 $336 $384 $384 On average, one-third of sales are collected in the quarter that they are sold, and two-thirds are collected in the following quarter. Assume that sales in the last quarter of the previous year were $336. Also, one third of the orders are paid for in the current month and then two thirds of the next quarter's orders are paid in advance. Assuming that Paymore’s labor and administrative expenses are $65 per quarter and that interest on long-term debt is $40 per quarter, work out the net cash flow for Paymore for the coming year using the below table. (Do not round intermediate calculations.)

Answer 1

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Answer:

	First	Second	Third	Fourth
Sources of cash
Collection on accounts receivables	348	368	352	352
Uses of cash:
Payments of accounts payable	273	258	276	288
Labor and administrative expense	65	65	65	65
Interest on long term debt	40	40	40	40
Total use of cash	378	363	381	393
Net cash inflow/(outflow)	-30	5	-29	-41