Activity on Financial Forecasting

One of your first jobs as a new employee of the Zero Corporation is to prepare a cash budget for the

period January 1 through June 30, 2008. Use the data below.

a. 80 percent of all sales are credit sates. 80 percent of credit sales are collected in the

following month. 15 percent and 4 percent of credit sales are collected 60 days and 90 days

after sale, respectively. 1 percent of sales become bad debts and are never collected.

b. Purchases during each month equal 65 percent of the following month’s estimated sales.

Payment for purchases is made in the month following the purchase.

c. The firm seeks to maintain a minimum cash balance of P300.000. The January 1 cash

balance is P 300,000.

d. The firm anticipates delivery of new equipment in April. A payment of P 400,000 will be

made upon delivery.

e. A quarterly tax payment of P500,000 is anticipated in March and June.

f. Rent is P 100,000 per month. Other cash expenses average 3 percent of the current month’s

sales.

g. Depreciation expense averagesf P 150,000 monthly.

h. Labor costs paid monthly averge 10 percent of the following month’s sales.

i. The board of directors desires to maintain the firm’s current dividend policy. A policy

payment of P450,000 is scheduled for June.

j. The company experienced sales of P 3,000,000 in October, 2007 and sales of P 2,000,000

during each of the last two months of 2007.

k. The projected sales schedule for the first seven months of 2008 is given below:

Sales Projection for January – July of 2008

January ………………………………………………………………………………………………….. P 3,000,000

February ……………………………………………………………………………………………….. 5,000,000

March ………………………………………………………………………………………………….. 5,000,000

April …………………………………………………………………………………………………….. 6,000,000

May …………………………………………………………………………………………………….. 3,000,000

June …………………………………………………………………………………………………….. 2,000,000

July ……………………………………………………………………………………………………… 2,000,000

l. The firm must make a semiannual interest payment of P 310,000 in June 1988.

Requirement:

1) Make a schedule of forecasted cash receipts

2) Schedule of forecasted Monthly Cash Payments

3) Monthly Cash Budget from January 1 to June 30, 2008

4) Borrowing and Repayment plan for cash budget

5) Place it in a 10 columnar sheet.

Financial Forecasting Activity