Pet Treats, Inc. specializes in gourmet pet treats and receives all income from sales and has...

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Pet Treats, Inc. specializes in gourmet pet treats and receivesall income from sales and has the following account details: Lastyear’s ending payables and receivables were $125M and $250M,respectively, while the cash balance was $80M. Historically, theaverage receivables turnover ratio has been 12.16667, while theaverage payables period has been 45 days. Recently, purchases havebeen approximately one half of sales but are purchased a quarter inadvance. The firm likes to maintain a minimum balance of $50M.Other relevant expenses include the following: Wages, taxes, andother expense are 30% of sales, Interest and dividend payments are$50M, and a major capital expenditure of $200M is expected in thesecond quarter. The following sales estimates are projected
Sales estimates (in millions): Q1 = 500; Q2 = 600; Q3 = 650; Q4= 800; Q1 next year = 550 a.
If the average inventory period is twice the receivables period,what is the cash cycle?
What are cash collections and ending receivables for quartersone and two?
What are cash payments and total disbursements for quarters oneand two?
What is the net cash flow and cumulative surplus or deficit forquarters one and two, and what does it imply about the firm’s cashneeds? What would the firm do about the surplus or deficit?

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Answer 1Average payables period 45 daysAverage receivable period 365 average receivables turnoverratio 365 1216667 30 daysAverage inventory period Twice the receivables period 2 30 60 daysCash Cycle Average inventory period Average receivableperiod Average payables period 60 30 45 45 daysCash Cycle 45 daysAnswer See Answer

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Pet Treats, Inc. specializes in gourmet pet treats and receivesall income from sales and has the following account details: Lastyear’s ending payables and receivables were $125M and $250M,respectively, while the cash balance was $80M. Historically, theaverage receivables turnover ratio has been 12.16667, while theaverage payables period has been 45 days. Recently, purchases havebeen approximately one half of sales but are purchased a quarter inadvance. The firm likes to maintain a minimum balance of $50M.Other relevant expenses include the following: Wages, taxes, andother expense are 30% of sales, Interest and dividend payments are$50M, and a major capital expenditure of $200M is expected in thesecond quarter. The following sales estimates are projectedSales estimates (in millions): Q1 = 500; Q2 = 600; Q3 = 650; Q4= 800; Q1 next year = 550 a.If the average inventory period is twice the receivables period,what is the cash cycle?What are cash collections and ending receivables for quartersone and two?What are cash payments and total disbursements for quarters oneand two?What is the net cash flow and cumulative surplus or deficit forquarters one and two, and what does it imply about the firm’s cashneeds? What would the firm do about the surplus or deficit?