The Company Is in the Process of Preparing a Cash

question 11

Multiple Choice

$\begin{array}{lcc}&\text { Cash Sales} &\text { Credit Sales}\\ \text { January } & £ 80,000 & £ 350,000 \\ \text { February } & 60,000 & 200,000 \\ \text { March } & 50,000 & 145,000 \\ \text {April}& 45,000 & 130,000 \\ \text { May}& 55,000 & 170,000 \\ \text { June}& 50,000 & 150,000 \\\end{array}$ The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:Collections on credit sales:
$60 \%$ in month of sale
$30 \%$ in month following sale
$10 \%$ in second month following sale
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Assume that the accounts receivable balance on January 1 is £70,000. Of this amount, £60,000 represents uncollected December sales and £10,000 represents uncollected November sales. Given these data, the total cash collected during January would be

• A)£270,000.
• B)£420,000.
• C)£345,000.
• D)£360,000.

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Definitions:

Economically Efficient

A state where resources are allocated in a way that maximizes the net benefit to society.

Market System

A financial system where investment, production, and distribution decisions are dictated by price signals resulting from the interplay of supply and demand forces.

Fundamental Question

Fundamental Question refers to the basic questions any economic system must answer, which include what to produce, how to produce, and for whom to produce.

Guiding Function

The role of prices in directing the allocation of resources and goods in an economy, ensuring resources are used where they are most valued.