Question

Short Answer Question 1:

Develop a cash budget for the next month using the information provided below. Comment on whether your firm will make additions to the short-term investment portfolio or be required to seek funds from a line of credit.

• The sales forecasts for the next month is $210,000
• The current months sales were $140,000
• 80% of sales are collected in the month of sale, with the remainder collected in the following month
• Cost of goods sold equal 70% of sales and the firm has a monthly lease payment of $75,000
• The cash position at the end of the current month is $70,000
• The target cash balance is $40,000

Answer 1

Detailed answer is provided in the hand written notes below.

Answer to Question Calculation of cash Budget for the next month Particulars Amount Receipts :- Opening Cash Balance $ 70000 Cash novelpts from sale $ 168000 of next month (80"/- of 210000) cash receipts from sole 28000 of curent month ( 20-4. of 140000) Total Receipts (A) $ 266000 Payments :- cost of Goods sold af next $ 147000 month ( 70.8.0f 210000) 75000 lease payment Total payment (6) cash Target 400vo Balance Total cash Regused (c) 262000 & 22200g $ 4000 supplus / (Deffcied) (4)-(c) Our firm will make addition of $ 4000 to the short-term invernment portfolio