Question

4. The following summary lists the projections for ACME Inc. A quarter of the company's sales are paid in cash. The balance is on credit with 1 month terms. Half of ACME's vendors have given 30 day terms and the balance have given 60 day terms. Note: Sales in January were $30,000. Inventory purchases in December and January were $200,000 and $0, respectively. All other expenses are paid in the month incurred. ACME currently has $500,000 cash on hand. Will ACME need to draw down is credit line over the next 6 months, and if so, how much and when? What are some strategies or policies ACME can put in place to increase cash flow?

			Feb	Mar	Apr	May	Jun	Jul
Sales			$ 50,000	$ 75,000	$ 80,000	$ 85,000	$ 90,000	$ 100,000
Inventory purchases				$ 200,000			$ 200,000
Other operating expenses			$ 125,000	$ 18,750	$ 20,000	$ 17,500	$ 22,500	$ 25,000
Capex				$ 150,000			$ 150,000

Answer 1