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Shia LeBeuf, a financial analyst for Transformers Company, has prepared the following sales and cash disbursement estimates for the period Feb - Jun of the current year:

Month Sales Cash Disbursements

Feb $500 $400

Mar $600 $300

Apr $400 $600

May $200 $500

Jun $200 $200

LeBeuf notes that, historically, 30% of sales have been for cash. Of credit sales, 70% are collected one month after the sale, the remaining 30% are collected 2 months after the sale. The firm wishes to maintain a minimum ending balance in its cash account of $25. Balances above that amount would be invested in short term government securities (marketable securities), whereas any deficits would be financed through short-term bank borrowing (notes payable). The beginning cash balance at Apr 1 is $115.

a) Prepare a cash budget for Apr, May and Jun

b) Decide how much financing, if any, at a maximum, would Transformers require to meet its obligations during this 3 month period. (please show your work).

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M946462

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