Question
The ABC Corporation is planning to request a line of credit from its bank and wants to estimate its cash needs for the month of
The ABC Corporation is planning to request a line of credit from its bank and wants to estimate its cash needs for the month of September. The following sales forecasts have been made for 2023:
SALES CASH
SALES
November $105,000
December $115,000
January $70,000
February $110,000
March $125,000
April $110,000
May $155,000
June $175,000
July $110,000
August $125,000
CREDIT SALES
November $128,000
December $138,000
January $94,000
February $114,000
March $75,000
April $112,000
May $124,000
June $118,000
July $100,000
August $55,000
PURCHASES
CASH PURCHASES
November $45,000
December $42,000
January $88,000
February $110,000
March $82,000
April $88,000
May $93,000
June $95,000
July $35,000
August $31,000
CREDIT PURCHASES
November $110,000
December $80,000
January $95,000
February $114,000
March $100,000
April $129,000
May $92,000
June $108,000
July $60,000
August $75,000
WEEKS PER MONTH
November 4
December 5
January 4
February 4
March 5
April 4
May 5
June 4
July 4
August 5
THE RENT RECEIVED PER WEEK IS $100.00
THE RENT PAID PER WEEK IS $400.00
SALARIES EXPENSES PER MONTH ARE $17,200
PROMOTION EXPENSES PER WEEK. ARE $175.00 ON SOCIAL MEDIA, $225 ON NEWSPAPERS, AND $315 IN OTHER PROMOTIONS. TOTAL $715 PER WEEK
OTHER EXPENDITURES ARE $3,900 PER MONTH
A CAPITAL EXPENDITURE OF $55,000 WILL BE PAID IN FEBRUARY.
ABC collects 85 percent of its credit sales in the month after the credit sale, 10 percent two months following the credit sale, and the remaining 5 percent three months following the sale.
The supplier is paid 85% one month after credit purchases are made and 15% two months after credit purchases are made.
The companys cash balance as of JAN 01, 2023, was an investment of $65,000.
A minimum balance of $65,000 must be always maintained to satisfy the firms line-of-credit agreement with its bank.
Harrison has arranged with its bank for short-term credit at an interest rate of 12 percent per annum (1 percent per month) to be paid monthly. , Then, if the firm needs to borrow $50,000 at the end of April, then it will pay $500 in interest (.01 * $50,000) at the end of May.
Prepare a cash budget for the first six months of 2023 (January TO JUNE) . Prepare a cash budget for the first six months of 2021 (January to June) Assume that the ending cash balance for December 2020 is $25,000 and that you want to maintain a balance of $22,000.
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All About Options
Authors: Thomas McCafferty
3rd Edition
0071484795, 978-0071484794
