Construct a short-term financial plan for Springfield Snowboards based on its expansion opportunity described in the Positive
Question:
Construct a short-term financial plan for Springfield Snowboards based on its expansion opportunity described in the "Positive Cash Flow Shocks" part of Section 20.1. Base the plan on the following table, which forecasts additional capital expenditures, marketing (SG&A), and working capital in Q1 and Q2 along with higher sales in Q2 to Q4. Assume that Springfield ends 2017 with $1 million in cash and that its bank will offer it a short-term loan at the rate 2.5% per quarter. Assume that the minimum cash balance to be maintained is $500,000. (Note that $500,000 is 500 in the tables, where all figures are in thousands of dollars.)
Complete the cash budget based on the assumptions of the problem. (Round to the nearest integer.) Answer:
Cash Balance and Short-Term Financing ($000) | 2017Q4 | 2018Q1 | 2018Q2 | 2018Q3 | 2018Q4 |
Starting Cash Balance | |||||
Change in Cash and Equivalents | |||||
Minimum Cash Balance | 500 | 500 | 500 | 500 | |
Surplus (Deficit) Relative to Minimum | [sur | [sur | [sur | [sur | |
Existing Short-term Financing | |||||
Increase (Decrease) in Short-Term Financing | |||||
Total Short-term Financing | |||||
Ending Cash Balance | 1000 |
Answer: The correct statement from the following is (answer "A", "B", "C", or "D".) A. They will need to borrow $426,000 for the first quarter of 2018, and they will pay back the loan during Q4 of 2018. B. They will need to borrow $426,000 for the second quarter of 2018, and they will pay back the loan during Q3 of 2018. C. They will need to borrow $426,000 for the first quarter of 2018, and they will pay back the loan during Q2 of 2018. D. They will need to borrow $426,000 for the third quarter of 2018, and they will pay back the loan during Q4 of 2018.
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones