Industrial Supply has projected Q1 sales at $38,200, Q2 sales at $44,900, and Q3 sales at $42,300.Purchasesequal69 percent of the next quarter's sales.The accounts receivable period is 30 days and the accounts payable period is 60 days.At the beginning of Q1, the firm has an accounts receivable balance of $11,800 and an accounts payable balance of $23,300.The firm pays $1,600 a month in cash expenses and $800 a month in interest and taxes.At the beginning of the Q1, the cash balance is $500 and the short-term loan balance is zero.During Q1, capital spending will be $2,100.The firm maintains a minimum cash balance of $200.Assume each month has 30 days.What is the cumulative cash surplus (deficit) at the end of Q1, prior to any short-term borrowing?

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Purchases equal 69 percent of the next quarter's sales. So, purchases for Q1 are $44,900 * 0.69 = $31,083. Purchases for Q2 are $42,300 * 0.69 = $29,193.The accounts receivable period is 30 days and the accounts payable period is 60 days. So, the average collection period is (30 + 60) / 2 = 45 days. This means that the firm collects 1/45 of its sales each month. So, the cash collections for Q1 are $38,200 * 1/45 = $849. The cash collections for Q2 are $44,900 * 1/45 = $998. The cash collections for Q3 are $42,300 * 1/45 = $940.The firm pays $1,600 a month in cash expenses and $800 a month in interest and taxes. So, the total cash expenses for Q1 are $1,600 + $800 = $2,400. The total cash expenses for Q2 are $2,400. The total cash expenses for Q3 are $2,400.At the beginning of Q1, the firm has an accounts receivable balance of $11,800 and an accounts payable balance of $23,300. So, the net working capital is $11,800 - $23,300 = -$11,500.The firm pays $1,600 a month in cash expenses and $800 a month in interest and taxes. So, the total cash expenses for Q1 are $1,600 + $800 = $2,400. The total cash expenses for Q2 are $2,400. The total cash expenses for Q3 are $2,400.At the beginning of the Q1, the cash balance is $500 and the short-term loan balance is zero. So, the total cash available is $500.During Q1, capital spending will be $2,100. So, the total cash outflow for Q1 is $2,400 + $2,100 = $4,500.The firm maintains a minimum cash balance of $200. So, the cumulative cash surplus (deficit) at the end of Q1, prior to any short-term borrowing, is $500 - $4,500 + $200 = -$3,800.

Industrial Supply Has Projected Q1 Sales at $38,200, Q2 Sales