Payables period is 60 days. It means company takes on an average 60 days to make payment to suppliers for purchases made. We can say 60 days purchases remain unpaid in a quarter . For eg. Payment for Jan's Purchases is done after 60 days i.e.in march i.e. within Q1, but payment for feb and march month's purchases is done in april and may i.e. in Q2. So, out of 3 months, 2 months purchases remains payable in quarter. So, in one quarter, we make payment of 2 months purchases of previous quarter and 1 month's purchases of current quarter. Thats why payment of accounts is 2/3 of previous quarter purchases and 1/3 of current quarter purchses is taken. | |||||
Q1 | Q2 | Q3 | Q4 | ||
a | Current Sales | $1,670.00 | $2,065.00 | $1,810.00 | $1,530.00 |
b | Next Quarter Sales | $2,065.00 | $1,810.00 | $1,530.00 | $2,025.00 |
c | Purchases of previous quarter (a*75%) | $1,252.50 | $1,548.75 | $1,357.50 | $1,147.50 |
d | Purchases of current quarter (b*75%) | $1,548.75 | $1,357.50 | $1,147.50 | $1,518.75 |
e | Payment of Accounts (c*2/3 + d*1/3) | $1,351.25 | $1,485.00 | $1,287.50 | $1,271.25 |
f | Wages, taxes and other expenses (a*20%) | $334.00 | $413.00 | $362.00 | $306.00 |
Q1 | Q2 | Q3 | Q4 | ||
Payment of Accounts | $1,351.25 | $1,485.00 | $1,287.50 | $1,271.25 | |
Wages, taxes and other expenses | $334.00 | $413.00 | $362.00 | $306.00 | |
Long term financing expenses (interest and dividends) | $90.00 | $90.00 | $90.00 | $90.00 | |
Total | $1,775.25 | $1,988.00 | $1,739.50 | $1,667.25 |
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