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.Assume all other disbursements are also equal throughout the year.Assume a 360-day year.The firm is most apt to face a cash-out situation in

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Given the 90-day collection period, the cash from sales made in the third quarter (when sales are highest) would be collected in the fourth quarter. This means that during the second quarter, the firm is collecting on its lowest sales volume from the first quarter, while still maintaining steady production costs, making a cash-out situation most likely in the second quarter.

A Manufacturing Firm Has a 90-Day Collection Period