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
  • The initial cash balance is $100 and the company maintains a minimum balance of $50
  • 18-

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