The Cash Forecast
Data related to preparation of cash budget:
1. The company experiences a 3 month collection cycle. All sales are for credit with 60 percent collected in the quarter of sale, 30
percent collected in the quarter following the sale, and 10 percent
collected 2 quarters after the sale. Sales for 3rd and 4th quarters of last year were $1,750,000 and $2,000,000.
2. Fifty percent of material purchases are paid in current quarter; 50
percent the following quarter.
3. Capital expenditures are estimated at $10,000,000 and are to be
financed by a $10,000,000 mortgage at 6% interest.
Repayments are made in increments of $1,000.
4. A $50,000 minimum balance of cash is maintained.