1) The November through February months represent a seasonal slow down for Green's Lawn Care & Services Co. Green's has some winter services, but they do not generate as much revenue as their standard summer services. Because of this seasonal down turn, the firm develops a cash budget in order to plan for possible short falls. Based on historical trends, the firm's economic forecasting staff has provided the information below. All of Green's sales are on a credit basis, and 90% are collected in the month following the sale. The remaining 10% are collected two months after the sale. "Material expenses" are 40% of the current months sales and are paid in the month incurred. All wages and overhead are also paid in the month incurred. As part of the firm's extension of its services, a monthly payment for new equipment of $300 is required through the end of 2003. In February the firm must repay a $13,000 note. Due to a settlement of a lawsuit, Green's will receive $50,000 at the end of December, resulting in an end cash balance for December of $65,000. The firms required minimum cash balance is $60,000. The firm has an agreement with a bank; a line of credit allows it to borrow up to $45,000 and it is the firms policy to repay outstanding balances as soon as excess cash is available. Based on the cash budget you prepare for the months of January through March, will the firm have to increase its line of credit in order to meet its borrowing needs?

Month	Estimated Sales	Wages	Overhead (Cash)
November, 2002	$25,000	$7,000	$3,000
December, 2002	27,000	8,000	4,000
January, 2003	25,000	7,000	3,000
February, 2003	10,000	5,000	2,000
March, 2003	50,000	10,000	7,000

Question options:

a) No, the firms maximum borrowing needs are $13,400
	b) No, the firms maximum borrowing needs are $18,500
	c) No, the firms maximum borrowing needs are $32,000
	d) Yes, the firms maximum borrowing needs are $51,350