Polk Co. expects to have a cash balance of $26,000 on January 1, 2010. Relevant monthly budget

Question:

Polk Co. expects to have a cash balance of $26,000 on January 1, 2010. Relevant monthly budget data for the first two months of 2010 are as follows.
Collections from customers: January $70,000; February $160,000
Payments to suppliers: January $45,000; February $75,000
Salaries: January $35,000; February $40,000. Salaries are paid in the month they are incurred.
Selling and administrative expenses: January $27,000; February $35,000. These costs are exclusive of depreciation and are paid as incurred.
Sales of short-term investments in January are expected to realize $7,000 in cash.
Polk has a at a local bank that enables it to borrow up to $45,000. The company wants to maintain a minimum monthly cash balance of $25,000. Any excess cash above the $25,000 minimum is used to pay off the Prepare a for January and February.
(b) Explain how a contributes to effective management.

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