The ZYX Corporation Is Planning to Request a Line of Credit

question 9

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 2005:
Collection estimates were obtained from the credit collection department as follows: 20% collected within the month of sale;70% collected the first month following the 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 cash budget for September.

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Definitions:

Accurate Representation

A depiction or description that closely matches the true characteristics or facts of a subject.

Brains

The organ in the head of vertebrates that controls the body's functions and enables it to think, feel, and remember.

Skeptical

Having an attitude of doubt or a disposition to incredulity either in general or toward a particular object.

Immanuel Kant

A German philosopher in the 18th century, known for his work in epistemology, ethics, and aesthetics, emphasizing duty, moral law, and the categorical imperative.