Nogueiras Corp's budgeted monthly sales are $5,000, and they are constant from month to month. 40% of its customers pay in the first month and take the 2% discount, while the remaining 60% pay in the month following the sale and do not receive a discount. The firm has no bad debts. Purchases for next month's sales are constant at 50% of projected sales for the next month. "Other payments," which include wages, rent, and taxes, are 25% of sales for the current month. Construct a cash budget for a typical month and calculate the average net cash flow during the month.

Question

Quizplus · Accepted Answer

The average net cash flow is calculated by considering the cash inflows and outflows. Cash inflows include 40% of sales collected in the current month with a 2% discount, and 60% collected in the following month. Cash outflows include purchases for next month's sales and other payments. The net cash flow is $1,210.

Nogueiras Corp's Budgeted Monthly Sales Are $5,000, and They Are