Finance question help!

[jackbanta]

Miller Corporation collects 20% of its sales in the month the sale is made, while collecting 60% of sales in the following month. MC's sales for January through April are:

January: $100; February: $125; March: $110; April: $125

MC has expenses of $50 every month. If MC had to make a loan payment of $30 in April, it would:

A. Have to borrow an additional $8
B. Have $8 left
C. Have $108 left
D. Have to borrow an additional $108

This is a question from a Finance practice test. I have NO idea how to figure it out. Doing the math out, I keep on getting +$63, but the answer says +$8.

What I am doing wrong?

[brothert69]

At first I got the same answer you did but then I reread the question. It says the company collects 20% in the month of the sale and 60% the following month. That still leaves 20% to be collected in the third month.
Using that logic I ended up with
Jan
+20 20% from Jan
-50 Jan expense

Feb
+60 60% from Jan
+25 20% from Feb
-50 Feb expense

Mar
+75 60% from Feb
+22 20% from Mar
+20 20% from Jan
-50 Mar expense

Apr
+66 60% from Mar
+25 20% from Apr
+25 20% from Feb
-50 Apr expense
-30 Apr Loan Payment

If you total it all up you get +108 or answer C

Miller Corporation collects 20% of its sales in the month the sale is made, while collecting 60% of sales in the following month. MC's sales for January through April are:

January: $100; February: $125; March: $110; April: $125

MC has expenses of $50 every month. If MC had to make a loan payment of $30 in April, it would:

A. Have to borrow an additional $8
B. Have $8 left
C. Have $108 left
D. Have to borrow an additional $108

This is a question from a Finance practice test. I have NO idea how to figure it out. Doing the math out, I keep on getting +$63, but the answer says +$8.

What I am doing wrong?

[jackbanta]

Good thought, but the answer key swears the answer is B. I'm very confused. Hoping the actual exam (taking it tomorrow!) isn't as poorly worded.

[brothert69]

Screwy answer key? Maybe someone better at finance will chime in but I dont see any way for it to be +8. Hope your exam is clearer. Good Luck tomorrow.

Good thought, but the answer key swears the answer is B. I'm very confused. Hoping the actual exam (taking it tomorrow!) isn't as poorly worded.

[frankiebleyes]

The answer is B.

[jackbanta]

Thanks for trying anyway, brothert, and thanks for wishing me luck!

frankie, why is it B, though?

[keithk]

The answer is B.

How'd you get +$8?

Like Jack, I get +$63:

X = .2($100 + $125 + $110 + $125) + .6($100 + $125 + $110) - $50(4) - $30

X = $92 + $201 - $200 - $30

X = $63

Definitely seems like some info is missing.

[scorched]

Best of luck.
Hope the answer key was messed up.

I have calculated it both ways, with +$8 and +$108.

[Kaz]

I'm not a finance guy, just a math guy. If you follow the directions TO THE LETTER the answer is +$63. I think brothert69 is right in that they seem to want you to assume that you'll get the left over 20% of sales that isn't explicitly stated in the third month. Then the answer would be +$108.

I have calculated it both ways, with +$8 and +$108.

What are "both ways"? I don't see how you could have gotten +$8 from a simple arithmetic point-of-view. As I said I haven't studied finance.

[jackbanta]

I'm just glad there wasn't a question like this on my test today!