Projecting a Cash Balance
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A firm has projected sales of $65,000 in January, $76,000 in February, and $84,000 in March. November's sales were $68,000, and December's sales were $72,000. The firm makes 60% of their sales on credit. Of these credit sales, 70% is collected in one month, and 27% in two months. Purchases average 65% of sales. Purchases are made on credit and paid in the following month. Wages and overhead are $7,000 a month. If the firm has a cash balance of $122,000 at the beginning of January, what will its cash balance be in March?
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This solution illustrates how to project a cash balance.
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