### CFA Practice Question

There are 443 practice questions for this topic.

### CFA Practice Question

Jumbo, Inc. had sales of \$8,000 in November, \$14,000 in December, and projects sales of \$10,000 in January, \$12,000 in February, and \$8,000 in March. The firm's COGS in any given month is equal to 70% of the next month's sales. The firm collects its receivables in 60 days and pays its payables in 30 days. The firm begins January 1 with \$10,000 in cash. All sales and purchases are on credit. There are no other costs or revenues. What are Jumbo's total cash disbursements in March? Assume there are 30 days in every month.
A. \$4,200
B. \$5,600
C. \$7,100
Explanation: How much did Jumbo buy in February?

### User Contributed Comments5

User Comment
za20884 i do not understand this question. any one can explain it
Lamkerst Feb sales 12000
March sales 8000
March COGS 5600

Since days receivales = 60, and days payables =30
in March we are paid for February sales and pay for March COGS. March COGS is 5600 -- this is cash disbursement.
rana1970 quetion ask how much you buy in feb?
i.e 70% of march sale.
march sale=8000
feb disbursment=5600
supersimps You sold 8000 in march, meaning a COGS of 5600 in february which would have been paid 30 days later in march.... the implicit assumption here is that purchases = COGS in every period, otherwise this question would not work since a company could just load up on inventory...
azramirza Jan
Jan cash=10000
Rec=8000(nov)
Pay=-7000(dec)
Feb
Rec-1400(dec)
Pay=-8400(Jan)
Mar=10000
=5600