Prepare a Cash Budget for Bubba's Bikes

Assumptions:

The firm makes $20\%$ of all sales for cash & collects $40\%$ of its sales in each of the $2$ months following the sale

Other cash inflows are expected to be $$12,000$ in September and April, $$15,000$ in January and March, and $$47,000$ in February

The firm pays cash for $10\%$ of its purchases, $50\%$ one month later and $40\%$ after $2$ months.

Wages and salaries amount to $20\%$ of the preceding month's sales

Rent of $$19,000$ must be paid monthly

Interest payments of $$20,000$ are due in January and April.

A principal payment of $$30,000$ is due in April

The firm expects to pay cash dividends of $$25,000$ in January and April

Taxes of $$80,000$ are due in April

The firm also intends to make a $$25,000$ cash purchase of fixed assets in December

Sales and puchases by month are expected to be as follows;

$20232024$

Sep Oct Nov Dec Jan Feb Mar Apr

Sales $210,000250,000170,000160,000140,000180,000200,000250,000$

Purchases $120,000150,000140,000100,00080,000110,000100,00090,000$

Prepare a cash budget for Bubba's Bikes by completing the format laid out below and incorporating the above assumptions, highlighting your answers to the following:

a$)$ Assuming that the firm has a cash balance of $$22,000$ at the beginning of November, determine the end$-$of$-$month cash balances for each month, November through April.

b$)$ Assuming that the firm wants to maintain a $$15,000$ minimum cash balance, determine the required total financing or excess cash balance for each month, November through April.

c$)$ If Bubba were going to request a line of credit at the bank to cover financing for the period November to April, how large would this line have to be$?$

$20232024$

Sep Oct Nov Dec Jan Feb Mar Apr

Sales $210,000250,000170,000160,000140,000180,000200,000250,000$

Cash rec.

$1$ month

$2$ months

Other rec.

Total Rec.

Purchases

Cash

$1$ month

$2$ months

Wages

Rent

Interest

Principal

Dividends

Taxes

F$/$A purch.

Total disp.

Receipts

Disburs.

Net CF

Beg, Cash

End Cash

Min Bal.

Req. Fin.

Excess