CFA Practice Question

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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 January? Assume there are 30 days in every month.
A. $10,000
B. $11,000
C. $12,000
Explanation: Did you get January collections of $8,000 and payments of $7,000?

User Contributed Comments 8

User Comment
Tanatas can anyone comment on that?
leo6fin Jan 1st cash available is 10,000
receivables would be sales from NOV 8000
payables would be COGS from DEC .70(10000) -7000

10,000 + 8000 - 7000 = 11000
soarer1 where did the "-7000" come from?
chamad 70% of next month sales
ElCarnal .....? the company pays in advance?? it should be 14% * 14000
deibertm They purchas their inventory before they sell it. So its 70% of next months sales.
Querdenker If the payables are paid after 30 days, then at the end of January, no January payables have been paid yet (but all the Dec payables). Correct answer should be 8,200 from my perspective.
gill15 not 8200. Our payables that reduce our cash are from Decemeber.

Good question
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