Redo the cash budget in Exhibit 24.1. a. Assume that the desired minimum level of cash is

Question:

Redo the cash budget in Exhibit 24.1.

a. Assume that the desired minimum level of cash is $4,000 instead of $10,000. What is the change in the firm’s need for funds?

b. Assume that 60 percent of sales are for cash instead of 30 percent and the pattern of collections remains the same (90 percent after one month and 10 percent after two months). What is the change in the firm’s need for funds?

c. Assume that both the desired minimum level of cash and sales change as in parts a and b. What is the revised cash budget’s “bottom line”?

Cash Budget
A cash budget is an estimation of the cash flows for a business over a specific period of time. These cash inflows and outflows include revenues collected, expenses paid, and loans receipts and payment. Its primary purpose is to provide the...