Adjust the Cash Balance

We obtain the following 2020 forecasts of selected financial statement line items for Journey Company.

$ millions	2019 Actual	2020 Est.
Net Sales	$623,528	$651,586
Marketable securities	59,044	54,644
Long-term debt	304,971	271,425
Treasury stock (deducted from equity)	45,033	45,033
Cash generated by operations		50,772
Cash used for investing		(13,119)
Cash used for financing		(48,101)
Total net change in cash		(10,448)
Cash at beginning of period		45,004
Cash at end of period		$34,556

Note: Complete the entire question in Excel using the following template: Excel Template. Format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal places.

a. Does forecasted cash deviate from the normal level for this company?

Calculate the company's normal cash level as a percentage of sales.

	Normal cash as a % of sales
	Answer

Using the answer above, compute what should be the normal cash balance for FY2020.

	Normal cash balance for FY2020
	Answer

b. Is the deviation in part a large enough to require adjustment? Explain.

AnswerNo. The deviation is not large enough to require an adjustment.Yes. The deviation is large enough to require an adjustment.

c. Identify three ways to adjust the forecasted cash balance.

Which option would least likely be used to adjust the cash balance?

AnswerSell marketable securitiesDecrease capital expendituresIncrease long-term debtSell treasury stock

d. Complete the following statement of cash flows assuming long-term debt is used to adjust the forecasted cash balance.

	Statement of Cash Flows
	Cash generated by operations	Answer
	Cash used for investing	Answer
	Cash used for financing	Answer
	Total change in cash	Answer
	Cash at beginning of period	Answer
	Cash at end of period	Answer

e. Complete the following statement of cash flows assuming marketable securities are used to adjust the forecasted cash balance.

	Statement of Cash Flows
	Cash generated by operations	Answer
	Cash used for investing	Answer
	Cash used for financing	Answer
	Total change in cash	Answer
	Cash at beginning of period	Answer
	Cash at end of period	Answer