Question

Multiple cash budgets- Scenario analysis Brownstein, Inc, expects sakes of $99000 during each plus 4% of sales Brownstein of the next 3 months It will make montily purchases of $62,000 during this time. Wages and salaries are $20,000 per month receive $7,000 in cash from the sale of an asset in the third month Al expects to make a tax payment of $21,000 in the next month and a $11,000 purchase of fixed assets in the second month and to sales and purchases are for cash Beginning cash and the minimum cash balance are assumed to be a, Construct a cash budget for the next 3 months b. Brownstein is unsure of the sales levels, but all other Sigures are certain I ending cash balances that the firm can expect for each of the 1-month periods? C. Brielly disouss how the fnancial manager can use the data in parts a. and b. to plan for financing needs a. Construct a cash budget for the sext 3 months Complete the Brownstein Inc's cash budget for the 1st month below (Round to the nearest 5000) Brownstein, Inc. Cash Budget (5000 Most likely scenario Saks Sale of asset Purchases Wages and salaras Taxes 1st Month

Answer 1

a) Cash budget:
	1st Month	2nd Month	3rd Month
Cash OB	0	13040	-5920
Sales receipts	99000	99000	99000
Sale of Asset			7000
Cash available	99000	112040	100080
Less:disbursements:
Purchases	62000	62000	62000
Wages and Salaries	23960	23960	23960
Taxes		21000
purchase of FA		11000
Total disbur	85960	117960	85960
Cash CB	13040	-5920	14120
b) Cash budget for the first month for pessimistic and optimistic situation:
	Pessimistic 1st year	Optimistic 1st Year
Cash OB	0	0
Sales receipts	82000	121000
Sale of Asset
Cash available	82000	121000
Less:disbursements:
Purchases	62000	62000
Wages and Salaries	23960	23960
Taxes
purchase of FA
Total disbur	85960	85960
Cash CB	-3960	35040
c) The financial manager can use the data in parts a & b to plan for
financing needs through:
i) Not to take the sales for the first month less than $85960 to avoid cash out.
ii)to tackle the pessimistic situation, funds should be made available from bank.
iii)in case of most optimistic situation, payment of the taxes must be made early
to avoid penalties.
iv) To avoid the negative cash balance, it is important is adjust the payments and
take credits in purchase payments.