Question

Multiple cash budgets-Scenario analysis Brownstein, Inc, expects sales of $99,000 during each of the next 3 monthes. It will make monthly purchases of $62 000 hring this time Wages and salaries are S20 000 per month phr 4% of sal str stein expects to make a tax yment of S21,000 n te next month and a S11,000 purchase of fixed assets in the second month and to receive $7,000 in cash from the sale of an asset in the third month. All sales and purchases are for cash. Beginning cash and the minimum cash balance are assumed to be zero a. Construct a cash budget for the next 3 months b. Brownstein is unsure of the sales levels, but all other figures are certain If the most pessimistic sales figure is $82,000 per month and the most optimistic is 5121,000 per month, what are the monthly minimum and maximum ending cash balances that the firm can expect for each of the 1-month periods? c. Briefly discuss how the financial manager can use the data in parts a and b. to plan for financing needs Most likely scenario Sales Sale of asset Purchases Wages and salaries 1st Month axes Purchase of fixed asset Net cash flow Enter any number in the edit fields and then continue to the next question

Answer 1

Answer

a.Cash Budget - Ist Month
Most Likely Scenario	Ist Month
Sales	99,000
Sale of Asset	0
Purchases	62,000
Wages and Salaries	23,960
Taxes	21,000
Purchase of Fixed Asset	0
Net Cash flow	-7,960
Add: Beginning Cash	0
Ending Cash	-7,960
Note: Wages and Salaries = 20,000 + 4% of 99000 = 22,700

Most Likely Scenario	2nd Month
Sales	99,000
Sale of Asset	0
Purchases	62,000
Wages and Salaries	23,960
Taxes	0
Purchase of Fixed Asset	21,000
Net Cash flow	-7,960
Add: Beginning Cash	-7,960
Ending Cash	-15,920

Most Likely Scenario	3rd Month
Sales	95,000
Sale of Asset	7,000
Purchases	62,000
Wages and Salaries	23,960
Taxes	0
Purchase of Fixed Asset	0
Net Cash flow	16,040
Add: Beginning Cash	-15,920
Ending Cash	120