The ZYX Corporation Is Planning to Request a Line of Credit

question 43

Essay

The ZYX Corporation is planning to request a line of credit from its bank and wants to estimate its cash needs for the month of September.The following sales forecasts have been made for 2010:
July $500,000
August 400,000
September 300,000
October 200,000
November 100,000
Collection estimates were obtained from the credit collection department as follows: 20% collected within the month of sale; 70% collected the first month following this sale; and 10% collected the second month following the sale.Payments for labor and raw materials are typically made in the month in which these costs are incurred.Total labor and raw material costs each month are 50% of sales.General administrative expenses are $30,000 per month,lease payments are $10,000 per month,and depreciation charges are $20,000 per month.The corporation tax rate is 40%; however,no corporate taxes are paid in September.Prepare a pro forma income statement and cash budget for September.

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Definitions:

State Of Readiness

Refers to the preparedness or readiness of an organization or individual to respond to situations, challenges, or changes effectively.

Emotions

Complex psychological states that involve physiological reactions, subjective feelings, and expressive behaviors.

Communications

The process of transmitting information and meaning between individuals or groups through the use of shared symbols, signs, and behaviors.

Behavioral Intentions

refer to the motivational factors that influence an individual's preparedness to perform a particular behavior or action.