Helen Bowers, owner of Helen's Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2021 and 2022 May 2021 $160,000 160,000 June July 320,000 August 450,000 September 640,000 October 320,000 November 320,000 December 80,000 January 2022 160,000 Estimates regaing payments obtained from the credit department are as follows: collected within the month of sale, 10%; collected the month following the sale, 75%; collected the second month following the sale, 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials: May 2021 $ 60,000 80,000 June July 112,000 August 736,000 September 272,000 October 192,000 November 128,000 80,000 December General and administrative salaries are approximately $33,000 a month. Lease payments under long-term leases are $11,000 a month. Depreciation charges are $44,000 a month. Miscellaneous expenses are $4,950 a month. Income tax payments of $56,000 are due in September and December A progress payment of $180,000 on a new design studio must be paid in October, Cash on hand on July 1 will be $124,000, and a minimum cash balance of $95,000 should be maintained throughout the cash budget period. The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations, Round your answers to the nearest dollar. If your answer is zero, enter "0". c. Now suppose receipts from sales come in uniformly during the month (that is, cash receipts come in at the rate of 1/30 or 1/31 each day), but all outflows must be paid on the Sth. Will this affect the cash budget? That is, will the cash budget you prepared be valid under these assumptions? If not, what could be done to make a valid estimate of the peak financing requirements? No calculations are required, although if you prefer, you can use calculations to illustrate the effects. In a situation, where inflows and outflows are not synchronized during the month, t make a valid estimate of the peak financing requirements, the company D kely to be possible to use a cash budget centered on the end of the month. To d. Bowers' sales are seasonal, and her company produces on a seasonal basis, just ahead of sales. Without making any calculations, discuss how the company's current and debt ratios would vary during the year if all financial requirements were met with short-term bank loans. Could changes in these ratios affect the firm's ability to obtain bank credit? Explain. The months preceding peak sales would show current ratio and ( debt-to-capital ratio due to additional short-term bank loans. In the following and the debt-to-capital ratio would Abnormal changes in these ratios months s receipts are collected from sales, the current ratio would affect the firm's ability to obtain bank credit. e. If Bowers' customers began to pay late, collections would slow down, thus increasing the required loan amount. If sales declined, this also would have an effect on the required loan. Do a sensitivity analysis that shows the effects of these two factors on the maximum loan requirement. Enter your answers as positive numbers. To complete the sensitivity analysis, follow these steps in excel: - Ensure that cell A60 is a reference to cell 856 (Le."-856). Select/highlight cellis A60 through H69 (A60:H69). From the top ribbon, select Data > Forecast > What-If-Analysis Data Table For row Input cell click on cell 85 or enter $B$5. For column input cell click on cell B14 or manually enter $0$14. e. If Bowers' customers began to pay late, collections would slow down, thus increasing the required loan amount. If sales declined, this also would have an effect on the required loan. Do a sensitivity analysis that shows the effects of these two factors on the maximum loan requirement. Enter your answers as positive numbers. To complete the sensitivity analysis, follow these steps in excel: Ensure that cell A60 is a reference to cell 856 (.e."-856"). Select/highlight cells A60 through H69 (A60:H69). From the top ribbon, select Data > Forecast > What-If-Analysis > Data Table For row input cell click on cell 85 or enter $B$5. For column input cell dick on cell 814 or manually enter $0$14. H - Click "OK". % Collections in 2nd month Change in sales 0% 15% 45% 75% 90% -100% $ $ $ $ -75% $ $ $ $ -50% S -25% $ $ $ 0% 25% 50% 75% 100% $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 30% $ $ 60% S $ $ $ $ Helen Bowers, owner of Helen's Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2021 and 2022 May 2021 $160,000 160,000 June July 320,000 August 450,000 September 640,000 October 320,000 November 320,000 December 80,000 January 2022 160,000 Estimates regaing payments obtained from the credit department are as follows: collected within the month of sale, 10%; collected the month following the sale, 75%; collected the second month following the sale, 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials: May 2021 $ 60,000 80,000 June July 112,000 August 736,000 September 272,000 October 192,000 November 128,000 80,000 December General and administrative salaries are approximately $33,000 a month. Lease payments under long-term leases are $11,000 a month. Depreciation charges are $44,000 a month. Miscellaneous expenses are $4,950 a month. Income tax payments of $56,000 are due in September and December A progress payment of $180,000 on a new design studio must be paid in October, Cash on hand on July 1 will be $124,000, and a minimum cash balance of $95,000 should be maintained throughout the cash budget period. The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations, Round your answers to the nearest dollar. If your answer is zero, enter "0". c. Now suppose receipts from sales come in uniformly during the month (that is, cash receipts come in at the rate of 1/30 or 1/31 each day), but all outflows must be paid on the Sth. Will this affect the cash budget? That is, will the cash budget you prepared be valid under these assumptions? If not, what could be done to make a valid estimate of the peak financing requirements? No calculations are required, although if you prefer, you can use calculations to illustrate the effects. In a situation, where inflows and outflows are not synchronized during the month, t make a valid estimate of the peak financing requirements, the company D kely to be possible to use a cash budget centered on the end of the month. To d. Bowers' sales are seasonal, and her company produces on a seasonal basis, just ahead of sales. Without making any calculations, discuss how the company's current and debt ratios would vary during the year if all financial requirements were met with short-term bank loans. Could changes in these ratios affect the firm's ability to obtain bank credit? Explain. The months preceding peak sales would show current ratio and ( debt-to-capital ratio due to additional short-term bank loans. In the following and the debt-to-capital ratio would Abnormal changes in these ratios months s receipts are collected from sales, the current ratio would affect the firm's ability to obtain bank credit. e. If Bowers' customers began to pay late, collections would slow down, thus increasing the required loan amount. If sales declined, this also would have an effect on the required loan. Do a sensitivity analysis that shows the effects of these two factors on the maximum loan requirement. Enter your answers as positive numbers. To complete the sensitivity analysis, follow these steps in excel: - Ensure that cell A60 is a reference to cell 856 (Le."-856). Select/highlight cellis A60 through H69 (A60:H69). From the top ribbon, select Data > Forecast > What-If-Analysis Data Table For row Input cell click on cell 85 or enter $B$5. For column input cell click on cell B14 or manually enter $0$14. e. If Bowers' customers began to pay late, collections would slow down, thus increasing the required loan amount. If sales declined, this also would have an effect on the required loan. Do a sensitivity analysis that shows the effects of these two factors on the maximum loan requirement. Enter your answers as positive numbers. To complete the sensitivity analysis, follow these steps in excel: Ensure that cell A60 is a reference to cell 856 (.e."-856"). Select/highlight cells A60 through H69 (A60:H69). From the top ribbon, select Data > Forecast > What-If-Analysis > Data Table For row input cell click on cell 85 or enter $B$5. For column input cell dick on cell 814 or manually enter $0$14. H - Click "OK". % Collections in 2nd month Change in sales 0% 15% 45% 75% 90% -100% $ $ $ $ -75% $ $ $ $ -50% S -25% $ $ $ 0% 25% 50% 75% 100% $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 30% $ $ 60% S $ $ $ $