Forcasting Payments
If firm pays it's bill with 30 day delay, what fraction of it's purchases will be paid for in the current quarter? In following quarter? What is it's payment delay is 60 day.
30 day 1/2, current all 60 day 1/3
To calculate the fraction of purchases that will be paid for in the current quarter, we need to consider the payment delay and the length of each quarter.
Assuming each quarter is of equal length, typically 3 months, we can divide the payment delay by the length of the quarter to determine the fraction of purchases paid in the current quarter.
1. If the payment delay is 30 days:
- Divide 30 days by 90 days (3 months) to get the fraction of purchases paid in the current quarter.
- 30/90 = 1/3
Therefore, 1/3 or approximately 33.33% of purchases will be paid for in the current quarter.
2. If the payment delay is 60 days:
- Divide 60 days by 90 days (3 months) to get the fraction of purchases paid in the current quarter.
- 60/90 = 2/3
Therefore, 2/3 or approximately 66.67% of purchases will be paid for in the current quarter.
For the fraction of purchases paid in the following quarter, we consider the remaining portion after subtracting the fraction paid in the current quarter:
1. If the payment delay is 30 days:
- Subtract the fraction paid in the current quarter (1/3) from 1 to get the fraction paid in the following quarter.
- 1 - 1/3 = 2/3
Therefore, 2/3 or approximately 66.67% of purchases will be paid for in the following quarter.
2. If the payment delay is 60 days:
- Subtract the fraction paid in the current quarter (2/3) from 1 to get the fraction paid in the following quarter.
- 1 - 2/3 = 1/3
Therefore, 1/3 or approximately 33.33% of purchases will be paid for in the following quarter.