ACCA FM · Chapter 5 · Question 9 of 10
A company's sales are January $100k, February $120k and March $150k. Customers pay as follows: 20% in the month of sale, receiving a 2% discount; 50% in the following month; 28% two months after sale; 2% are bad debts. What are the expected cash receipts in March (in $000, to 1 decimal place)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $117.4k
Explanation
March receipts: from March sales 150 x 20% x 98% = 29.4; from February sales 120 x 50% = 60.0; from January sales 100 x 28% = 28.0. Total = 117.4 ($000). Ignoring the discount gives 118.0, and including the 2% bad debts as a receipt gives 119.4.
More Cash management and working capital funding MCQs
- Q1A company needs $1.5m of cash for payments over the next year, spread evenly over the year. Each sale of short-term investments to raise…
- Q2A company uses the Miller-Orr model. The minimum cash balance is $20,000, the cost of each transaction in securities is $50, the standard…
- Q3Using the Miller-Orr model, a company has set a lower cash limit of $10,000 and calculated a spread of $36,000. What is the return point?
- Q4Under the Miller-Orr cash management model, what action should a company take when its cash balance reaches the upper limit?
- Q5Which of the following is the main purpose of preparing a cash budget?