### CFA Practice Question

There are 120 practice questions for this study session.

### 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 is Jumbo's cash balance at the end of March? Assume there are 30 days in every month.
A. \$16,600
B. \$19,100
C. \$21,000

### User Contributed Comments8

User Comment
azramirza Can someone be kind enough to explain??
boddunah darn it. understanding question its drained my brain, but got answer right with approximation and eliminatin.
Profache January = 10,000 (Cash on hand)
January = 8,000 (Revenues from November)
January = -7,000 (Accounts payable of December)
February = 14,000 (Revenues from December)
February = -8400 (Acct Payable of January)
March = -5,600 (Acct. Payables of February)
March = 10,000 (Accounts receivable from January)

Total Cash = 10,000+8,000-7,000+14,000-8400-5,600+10,000 = 21,000
azramirza Thanks profache...brilliantxxx
soukhov its very helpful to decompose such problems on a paper into beggining cash, sales, cogs, cash out, cash in, ending cash balance.
abhinavkapoor my calculation was:
Receivables in 60 days, 3 receivables in 5 months only. no payment received early jan as sales are finalized by the end of the month; hence
end of jan we received nov 8000
end of Feb we received Dec 14000
end of Mar we received Jan 10000
beg cash balance in jan 10000
Total 42000(a)

payables, 70% of next month sales. also jan beging cash bal represents previous receivables settled, i.e. for nov; hence
jan we paid for dec; 70% of jan sales 7000
feb we paid for jan; 70% of feb sales 8400
mar we paid for feb: 70% of mar sales 5600
total 21000(b)

(a) - (b) 21000
xe077 Abinavkapoor thank you so much. nice explanation :-)
atlootah how do they expect us to do this in a minute