Paymore Products places orders for goods equal to 80% of its sales forecast in the next quarter. The sales forecasts for the next five quarters are as follows:
Quarter in Coming Year
First Second Third Fourth First Quarter
Sales forecast $550 $540 $520 $560 $560
The firm pays for its goods with a 1-month delay. Therefore, on average, three-fourths of purchases are paid for in the quarter that they are purchased, and one-fourth are paid in the following quarter.
Paymore’s customers pay their bills with a 2-month delay. Therefore, on average, two-fourths of sales are collected in the quarter that they are sold, and two-fourths are collected in the following quarter. Assume that sales in the last quarter of the previous year were $520.
Paymore’s labor and administrative expenses are $60 per quarter and that interest on long-term debt is $58 per quarter, work out the net cash inflow for Paymore for the coming year. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)
First Second Third Fourth
Sources of cash
Collections on accounts receivable
Uses of cash
Payments of accounts payable
Labor & administrative expenses
Interest on long-term debt
Total uses of cash
Net cash inflow