final finance problem i need this tomorrow

Week 11 Example Problems

1. Given the following information:

a. 50 percent of sales are for credit, and collections occur after thirty days.

b. A $150,000 Treasury bill matures in March.

c. Monthly fixed disbursements are $15,000.

d. Variable disbursements are 60 percent of sales and occur one month prior to sales.

e. A tax payment of $25,000 is due in February.

f. The initial cash is $10,000.

g. The minimum required cash balance is $5,000.

h. Variable cash disbursements are given for April.

Complete the following to construct the firms cash budget for the given months.

	January	February	March	April
Sales		$50,000	$65,000	$75,000
Cash Sales
Collections
Other receipts
Total cash receipts
Variable disbursements				35,000
Fixed disbursements
Other disbursements
Total cash disbursements
Net change during the month
Beginning cash
Ending cash
Required cash
Excess cash to invest
Cash borrowed

Solution:

Please download week 11 Example Problems Excel template for the solution to this problem. This problem is located in the Problem 1 tab.

The requirement to cover expenses before sales and the collection of accounts receivable means the firm initially has a cash outflow, which requires temporary borrowing. The redemption of the Treasury bill and the collection of the accounts receivable are used to retire the short-term loans, so the firm has excess cash to invest short-term at the end of the budget period.

2. Given the following information:

Sales
June	$100,000
July	500,000
August	100,000
September	50,000
October	100,000
November	1,000,000

a. 40% of the sales are for credit and are collected one month after the sale.

b. Other receipts: $100,000 in October

c. Variable disbursements: 80% of sales each month

d. Other disbursements: $10,000 a month

e. $80,000 for taxes in August

f. Beginning cash: $50,000

g. Desired cash: $10,000

Prepare a monthly cash budget for the firm.

Solution:

Please download the week 11 Example Problems Excel template for the solution to this problem. This problem is located in the Problem 2 tab.

The cash budget shows that the firm needs cash during July. Once July has passed, the firm's cash position improves so the firm can easily retire any short-term loan taken out to cover July's cash shortage. Then, even though it has a great sales month in November, cash needs are high, so it has to borrow again.

Adapted from:

Mayo, H. (2007). Basic finance: An introduction to financial institutions, investments & management. United States: Thomson South-Western.