A manufacturing ﬁrm has a 90 day collection period.The ﬁrm produces seasonal merchandise and thus has the least sales during the ﬁrst quarter of a year and the highest level of sales during the
Third quarter of a year.The ﬁrm maintains a relatively steady level of production which means that its
Cash disbursements are fairly equal in all quarters.The ﬁrm is most apt to face a cash-out situation
In:

Question

Quizplus · Accepted Answer

The firm collects cash 90 days after sales. Since sales are lowest in the first quarter, cash collections will be lowest in the second quarter, potentially leading to a cash-out situation.

A Manufacturing ﬁRm Has a 90 Day Collection Period