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Myers and Associates, a famous law office in California, bills its clients on the first of each...

Question:

Myers and Associates, a famous law office in California, bills its clients on the first of each month. Clients pay in the following fashion: 40% pay at the end of the first month, 30% pay at the end of the second month, 20% pay at the end of the third month, 5% pay at the end of the fourth month, and 5% default on their bills. Myers wants to know the anticipated cash flow for the first quarter of 2009 if the past billings and anticipated billings follow this same pattern. The actual and anticipated billings are as follows.

  Fourth Quarter   Actual Billings       First Quarter Anticipated Billings
Oct. Nov. Dec. Jan. Feb. Mar.
$392,000 $323,000 $296,000 $340,000 $360,000 $408,000

Cash Collection:

Cash collection refers to the cash collected from the sales of the company. It is the total cash sales plus the cash collected from the current period credit sales and the previous period credit sales.

Answer and Explanation:

The cash collection for the 3 months of the first quarter will be given as follows:

Particulars January February March
$ $ $
Collecti...

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Cash Collection & Concentration: Definition & Components

from Finance 101: Principles of Finance

Chapter 18 / Lesson 3
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