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Developing a Cash Budget

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The sales budget for your company in the coming year is based on a 20 percent quarterly growth rate with the first-quarter sales projection at $100 million. In addition to this basic trend, the seasonal adjustments for the four quarters are 0, -$10, -$5, and $15 million, respectively.

Generally, 50 percent of the sales can be collected within the quarter and 45 percent in the following quarter; the rest of sales are bad debt. The bad debts are written off in the second quarter after the sales are made. The beginning accounts payable balance is $81 million.

Assuming all sales are on credit, compute the cash collections from sales for each quarter.

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Solution Summary

This solution is comprised of a detailed explanation to compute the cash collections from sales for each quarter. Please note that this has not been completed using Excel, but the computations are clearly shown.

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Assuming all sales are on credit, compute the cash collections from sales for each quarter.

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