1. Collections on receivables

1. Collections on receivables If a firm pays its bills with a 30-day delay, what fraction of its purchases will be paid in the current quarter? In the following quarter? What if the delay is 60 days?

2. Forecasts of payables Dynamic Futon forecasts the following purchases from suppliers:

a. Forty percent of goods are supplied cash-on-delivery. The remainder are paid with an average delay of one month. If Dynamic Futon starts the year with payables of $22 million, what is the forecasted level of payables for each month?

b. Suppose that from the start of the year the company stretches payables by paying 40% after one month and 20% after two months. (The remainder continue to be paid cash on delivery.) Recalculate payables for each month assuming that there are no cash penalties for late payment.

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