Essentials of Corporate Finance
Example: Cash Budget Information
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Ross FCF 10Ce Ch18
Ross FCF 10Ce Ch18
Example:
Cash Budget Information
Pet Treats Inc. specializes in gourmet pet treats and
receives all income from sales
Sales estimates (in millions)
Q1 = 500; Q2 = 600; Q3 = 650; Q4 = 800; Q1 next year = 550
Accounts
receivable
Beginning receivables = $250
Average collection period = 30 days
Accounts payable
Purchases = 50% of next quarter’s sales
Beginning payables = 125
Accounts payable period is 45 days
Other
expenses
Wages, taxes and other expense are 25%
of sales
Interest and dividend payments are $50
A major capital expenditure of $200 is
expected in the second quarter
The initial cash balance is $100 and the company maintains a minimum balance of $50
18-
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