The ZYX Corporation is planning to request a line of credit from its bank and wants to estimate its cash needs
for the month of September. The following sales forecasts have been made for 2010:
July 500,000
August 400,000
September 300,000
October 200,000
November 100,000
Collection estimates were obtained from the credit collection department as follows: 20 collected within the
month of sale; 70 collected the first month following this sale; and 10 collected the second month following
the sale. Payments for labor and raw materials are typically made in the month in which these costs are
incurred. Total labor and raw material costs each month are 50 of sales. General administrative expenses are
30,000 per month, lease payments are 10,000 per month, and depreciation charges are 20,000 per month. The
corporation tax rate is 40; however, no corporate taxes are paid in September. Prepare a pro forma income
statement and cash budget for September.
Question 2
John Maynard Keynes segmented a firm's demand for cash into the following motives:
A) transaction, speculative and precautionary.
B) transaction, speculative, and risky.
C) transaction, liquidity, and speculative.
D) risk, investment, and liquidity.
Johannes Gutenberg, Page from the Forty-Two-Line Bible, Mainz.
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