Here are the forecast of sales by National Bromide for the first four months of

Question

Here are the forecast of sales by National Bromide for the first four months of 2010 (figures are in thousands).

                            Month 1            Mo.2            Mo. 2            Mo. 4
Cash sales                15                  24                 18                 14
Sales on credit       100                 120                 90                 70

On the average 50% of credit sales are paid for the in current month, 30% are paid in the next month, and the remainder are paid in the month after that. What is the expected cash inflow from operations in months 3 and 4?

Explanation / Answer

(FIGURES IN THOUSAND DOLLARS)

Item Cash flow in month 3 cash flow in month 4

1. cash sale 18 14

2. credit sales' 50% 90*0.5 = 45 70*0.5 = 35

3. credit sales' 30% 120*0.3 = 36 90*0.3 = 27

of prev. month

4. credit sales' 20% 100*0.2 = 20 120*0.2 = 24

of 2nd prev. month

TOTAL CASH FLOW 119 100 (ANSWER)

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