[stiffk11]

Paymore Products places orders for goods equal to 75% of its sales forecast in the next quarter. The sales
Forecasts for the next five quarters are as follows:
Quarter in Coming Year Following Year
First Second Third Fourth First Quarter
Sales forecast $432 $420 $396 $444 $444
The firm pays for its goods with a 1-month delay. Therefore, on average, two-thirds of purchases are paid for
In the quarter that they are purchased, and one-third are paid in the following quarter.
Paymore’s customers pay their bills with a 2-month delay. Therefore, on average, one-third of sales are
Collected in the quarter that they are sold, and two-thirds are collected in the following quarter. Assume that
Sales in the last quarter of the previous year were $396.
Paymore’s labor and administrative expenses are $73 per quarter and that interest on long-term debt is $46
Per quarter.
Suppose that Paymore’s cash balance at the start of the first quarter is $43 and its minimum acceptable
Cash balance is $30. Work out the short-term financing requirements for the firm in the coming year. The
Firm pays no dividends.