Fina

Permanent versus seasonal funds requirements. Manchester Industries’ current, fixed, and total assets for each month of the coming year are summarized in the following table.

Month Current Fixed Total assets

assets assets [(1) + ( 2 )]

( 1 ) ( 2 ) ( 3 )

January $ 15,000 $ 30,000 $ 45,000

February 22,000 30,000 52,000

March 30,000 30,000 60,000

April 18,000 30,000 48,000

May 10,000 30,000 40,000

June 6,000 30,000 36,000

July 9,000 30,000 39,000

August 9,000 30,000 39,000

September 15,000 30,000 45,000

October 20,000 30,000 50,000

November 22,000 30,000 52,000

December 20,000 30,000 50,000

a. Divide the firm’s monthly total funds requirement (total assets) into a permanent and a seasonal component.

b. Find the monthly average (1) permanent and (2) seasonal funds requirements using your findings in a.

a)

Month Total funds requirements Permanent Requirements Seasonal Requirements

January 45,000 36,000 9,000

February 52,000 36,000 16,000

March 60,000 36,000 24,000

April 48,000 36,000 12,000

May 40,000 36,000 4,000

June 36,000 36,000 0

July 39,000 36,000 3,000

August 39,000 36,000 3,000

September 45,000 36,000 9,000

October 50,000 36,000 14,000

November 52,000 36,000 16,000

December 50,000 36,000 14,000

Monthly average 432,000 124,000