MDU, A Michigan-based general contractor, bills its clients on the first of the month

Clients traditionally pay as follows: 60% pay by the end of the first month, 30% by the end of the second month, 7% by the end of the third month, and 3% default on their bills. For example, a $1.00 sale made in the month of July is billed August 1st and $0.60 is paid in August, etc. The firm's CEO wants to know the anticipated cash flow for the second quarter. Use the following information to estimate second-quarter cash flows.

What will be an ideal response?

Answer:

For example: April cash flow equals 7% of January sales + 30% of February sales + 60% of March sales = $388.000.