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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The firm will face a cash-out situation in the second quarter because it has the least sales in the first quarter, and with a 90-day collection period, the cash from these sales will be collected in the second quarter. Since disbursements are steady, the low cash inflow in the second quarter could lead to a cash-out situation.

A Manufacturing Firm Has a 90-Day Collection Period