Question 31a ii
It is the middle of December 20X6 and Pangli Co is looking at working capital management for January 20X7.
Forecast financial information at the start of January 20X7 is as follows:
| Inventory | $455,000 |
| Trade receivables | $408,350 |
| Trade payables | $186,700 |
| Overdraft | $240,250 |
| November 20X6 (actual) | $270,875 |
| December 20X6 (forecast) | $300,000 |
| January 20X7 (forecast) | $350,000 |
Pangli Co has a gross profit margin of 40%. Although Pangli Co offers 30 days credit, only 60% of customers pay in the month following purchase, while the remaining customers take an additional month of credit.
Inventory is expected to increase by $52,250 during January 20X7.
Pangli Co plans to pay 70% of trade payables in January 20X7 and defer paying the remaining 30% until the end of February 20X7. All suppliers of the company require payment within 30 days. Credit purchases from suppliers during January 20X7 are expected to be $250,000.
Interest of $70,000 is due to be paid in January 20X7 on fixed rate bank debt. Operating cash outflows are expected to be $146,500 in January 20X7. Pangli Co has no cash and relies on its overdraft to finance daily operations. Thecompany has no plans to raise long-term finance during January 20X7.
Assume that each year has 360 days.
Required:
(a) (ii) Calculate the overdraft expected at the end of January 20X7. (4 marks)