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+--- Thread: Finance question help! (/Thread-Finance-question-help)
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Finance question help! - jackbanta - 09-18-2011
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?
Finance question help! - brothert69 - 09-18-2011
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
jackbanta Wrote: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?
Finance question help! - jackbanta - 09-18-2011
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.
Finance question help! - brothert69 - 09-18-2011
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.
jackbanta Wrote: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.
Finance question help! - frankiebleyes - 09-18-2011
The answer is B.
Finance question help! - jackbanta - 09-19-2011
Thanks for trying anyway, brothert, and thanks for wishing me luck!
frankie, why is it B, though?
Finance question help! - keithk - 09-19-2011
frankiebleyes Wrote: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.
Finance question help! - scorched - 09-19-2011
Best of luck.
Hope the answer key was messed up.
I have calculated it both ways, with +$8 and +$108.
Finance question help! - Kaz - 09-19-2011
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.
hmuchmo1 Wrote: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.
Finance question help! - jackbanta - 09-19-2011
I'm just glad there wasn't a question like this on my test today!