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Sorry if this is the wrong place for this financial concept question, it's about the cash budget.

Accounts receivables at the beginning of the year are $345. The company has a 60 day collection period. Calculate cash collection in each of the four quarters.

Q1: 820
Q2: 850
Q3: 930
Q4: 1010

So in the case of a 45 day collection period I know that we must first calculate beginning cash + 1/2 * sales

We multiplied the sales by half because 45 days is a half quarter, so for a 60 day collection period it should be multiplied by 2/3 but that is wrong from what my professor told us as the correct way would be by 1/3.

I'm confused, can someone explain this part for me? Why is it 1/3 and not 2/3? Same thing for a 30 day receivable period.

closed as off-topic by GS - Apologise to Monica Jan 16 '18 at 18:33

This question appears to be off-topic. The users who voted to close gave this specific reason:

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  • Think about it this way - with a 60-day collection period, only the sales in the first 30 days (1/3) of the quarter will be collected in that quarter - the rest will be collected in the next quarter. – D Stanley Jan 16 '18 at 17:34
  • But they said in the first 60 days will be collected, why is it in the first 30 days? – Dan Jan 16 '18 at 17:58
  • No that means it takes 60 days to collect (on average) so if you make a sale on day 31, it will not get collected until day 91 (the first day of the next quarter) – D Stanley Jan 16 '18 at 18:30
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Collection occurs n days after sale, if n is 60:

Day of Sale     Day Collected
1               61
2               62
3               63
...
29              89
30              90
31              91

Only the first 30 days will be collected in the 90 that comprise the quarter. Take the difference between days in the quarter and collection period first: (90-60)/90 = 1/3.

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