Zeus, Inc. has 30% of its sales in receivables that are collected in the month of sale and the remaining 70% of sales result in receivables collected in the month after the sale. Zeus' purchases are made and paid for in the month of sales and are 50% of sales. Sales are projected as follows: August - $14,000; September - $20,000; October - $18,000. Calculate the net cash flows for the month of October.

Question

Quizplus · Accepted Answer

For October, the net cash flows are calculated as follows: - Cash inflows: 30% of October sales ($18,000) collected in October = $5,400. Plus, 70% of September sales ($20,000) collected in October = $14,000. Total cash inflows = $5,400 + $14,000 = $19,400. - Cash outflows: Purchases in October are 50% of October sales = 50% of $18,000 = $9,000. - Net cash flows for October = Cash inflows - Cash outflows = $19,400 - $9,000 = $10,400.

Zeus, Inc Has 30% of Its Sales in Receivables That Are