The ZYX Corporation Is Planning to Request a Line of Credit

question 91

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: 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:

Hypomanic Episode

A period characterized by a persistently elevated, expansive, or irritable mood that is distinctly different from the individual’s usual non-depressed mood and lasts at least four days.

Depressive Episode

A period characterized by symptoms of major depression, such as depressive mood or loss of interest and pleasure in daily activities, lasting for at least two weeks.

Clinical Mood Disorder

A category of mental disorders characterized by a significant disturbance in a person’s mood, such as depression or bipolar disorder.

Diagnosis Criteria

The specific guidelines and standards used by healthcare professionals to identify and classify diseases and conditions.