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    CH04 Problem

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    Tuyền Võ Thanh
    This document provides information and instructions for three cash budget problems. It gives projected cash collection and payment amounts for a marketing firm for July to December 2017. It also provides forecasted sales, collection, and expense information for a printer manufacturer from January to June 2018. Students are asked to prepare basic and complex cash budgets for both companies, including determining minimum monthly borrowing needs and optimizing a capital expenditure.

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    CH04 Problem

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    Tuyền Võ Thanh
    139 views2 pages
    This document provides information and instructions for three cash budget problems. It gives projected cash collection and payment amounts for a marketing firm for July to December 2017. It also provides forecasted sales, collection, and expense information for a printer manufacturer from January to June 2018. Students are asked to prepare basic and complex cash budgets for both companies, including determining minimum monthly borrowing needs and optimizing a capital expenditure.

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    This document provides information and instructions for three cash budget problems. It gives projected cash collection and payment amounts for a marketing firm for July to December 2017. It also provides forecasted sales, collection, and expense information for a printer manufacturer from January to June 2018. Students are asked to prepare basic and complex cash budgets for both companies, including determining minimum monthly borrowing needs and optimizing a capital expenditure.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    139 views2 pages

    CH04 Problem

    Uploaded by

    Tuyền Võ Thanh
    This document provides information and instructions for three cash budget problems. It gives projected cash collection and payment amounts for a marketing firm for July to December 2017. It also provides forecasted sales, collection, and expense information for a printer manufacturer from January to June 2018. Students are asked to prepare basic and complex cash budgets for both companies, including determining minimum monthly borrowing needs and optimizing a capital expenditure.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    CHAPTER 4: THE CASH BUDGET

    Instructor’s Manual Problem Set


    Solutions can be found in the accompanying Excel files. Note that if you wish to see all of the formulas at
    once, you may use the CTRL+` (Control plus grave accent) shortcut key to toggle them on or off.

    1. The Right Target, Inc., a marketing research and consulting firm, is working on a cash budget
    for July to December 2017. The staff has projected the following cash collections and payments:
    Collections Payments
    Month
    Cash Sales Credit Sales Purchases Wages Miscellaneous Expenses
    July $10,000 $20,000 $15,000 $6000 $1,500
    August $12,000 $24,000 $18,000 $7,200 $2,000
    September $14,000 $28,000 $21,000 $8,400 $2,500
    October $16,000 $32,000 $24,000 $9,600 $3,000
    November $20,000 $40,000 $30,000 $12,000 $4,000
    December $25,000 $50,000 $37,500 $15,000 $4,500
    a) If the ending cash balance as of June 30, 2017 was $10,000, determine the firm’s forecasted monthly
    cash balance.
    b) The staff at The Right Target, Inc. wants to know how much they would need to borrow each month
    if the minimum ending cash balance is $30,000 and the annual interest rate is 7%.
    c) Determine the impact on the ending cash balance if the firm uses any cash surplus above the required
    minimum cash balance to pay off its short-term borrowing monthly.

    2. Precise Speed Inc., a laser printer manufacturer, has the following forecasted sales for 2018:
    January February March April May June July
    $200,000 $350,000 $450,000 $350,000 $250,000 $200,000 $300,000

    Actual sales in November and December 2017 were $375,000 and 266,667, respectively. Sixty
    percent of sales are on credit. The firm collects 60% of these credit sales during the first after
    the sale and the remainder during the following second month. Purchases constitute 60% of the
    next month’s sales. The company pays 50% during the first month after the purchase was made
    and the remainder in the next month. Wages, taxes and other expenses are expected to be 30%
    of forecasted sales. A major capital expenditure of $70,000 is expected in March. Interest
    payments are expected to be $30,000 every month and the company needs a minimum cash
    balance of $25,000. The beginning cash balance is $30,000.
    a) Using the Bithlo Barbecues’ simple cash budget example from Chapter 4, help the financial staff of
    Precise Speed Inc., to prepare their cash budget for January to June 2018.
    b) Assume that Precise Speed Inc. has some flexibility in scheduling the major capital expenditure
    expected in March. Use the Scenario Manager to see in what month Precise Speed should make this
    expenditure in order to minimize the maximum borrowing. Create a scenario summary to show the
    result.
    c) If the firm will invest any cash in excess of $40,000 at a rate of 3% and will pay interest on its short-
    term borrowings of 7%, help the financial staff at Precise Speed Inc., prepare a cash budget using the
    Bithlo Barbecues’ complex cash budget example from Chapter 4. The cash budget should include
    interest payments on borrowed funds and the investment of excess cash.

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