In: Finance
Cash budgetlong dashBasic Grenoble Enterprises had sales of $ 50 comma 200 in March and $ 59 comma 800 in April. Forecast sales for May, June, and July are $ 70 comma 300 , $ 79 comma 600 , and $ 100 comma 400 , respectively. The firm has a cash balance of $ 5 comma 300 on May 1 and wishes to maintain a minimum cash balance of $ 5 comma 300. Given the following data, prepare and interpret a cash budget for the months of May, June, and July. (1) The firm makes 17 % of sales for cash, 62 % are collected in the next month, and the remaining 21 % are collected in the second month following sale. (2) The firm receives other income of $ 1 comma 700 per month. (3) The firm's actual or expected purchases, all made for cash, are $ 50 comma 500 , $ 70 comma 200 , and $ 80 comma 400 for the months of May through July, respectively. (4) Rent is $ 2 comma 700 per month. (5) Wages and salaries are 9 % of the previous month's sales. (6) Cash dividends of $ 3 comma 400 will be paid in June. (7) Payment of principal and interest of $ 4 comma 100 is due in June. (8) A cash purchase of equipment costing $ 6 comma 300 is scheduled in July. (9) Taxes of $ 5 comma 700 are due in June.
1) | CASH BUDGET: | March | April | May | June | July | Total |
Beginning balance | 5300 | 10003 | 3500 | 5300 | |||
Receipts: | |||||||
Cash sales | 11951 | 13532 | 17068 | 42551 | |||
Cash collected from receivables | 49634 | 58349 | 66068 | 174051 | |||
[See worksheet below] | |||||||
Other income | 1700 | 1700 | 1700 | 5100 | |||
Total receipts | 63285 | 73581 | 84836 | 221702 | |||
Total cash available | 68585 | 83584 | 88336 | 227002 | |||
Disbursements: | |||||||
Cash purchases | 50500 | 70200 | 80400 | 201100 | |||
Rent | 2700 | 2700 | 2700 | 8100 | |||
Wages and salaries | 5382 | 6327 | 7164 | 18873 | |||
Dividends | 3400 | 3400 | |||||
Payment of principal and interest | 4100 | 4100 | |||||
Purchase of equipment | 6300 | 6300 | |||||
Payment of taxes | 5700 | 5700 | |||||
Total disbursements | 58582 | 92427 | 96564 | 247573 | |||
Surplus/(Deficit) | 10003 | -8843 | -8228 | -20571 | |||
Financing: | |||||||
Borrowing required | 0 | 12343 | 11728 | 24071 | |||
Repayment of borrowings | 0 | 0 | 0 | 0 | |||
Payment of interest | 0 | 0 | 0 | 0 | |||
Total financing | 0 | 12343 | 11728 | 24071 | |||
Ending balance of cash | 10003 | 3500 | 3500 | 3500 | |||
WORKSHEET: | |||||||
Sales | 50200 | 59800 | 70300 | 79600 | 100400 | ||
Cash sales | 8534 | 10166 | 11951 | 13532 | 17068 | ||
Collection from receivables: | |||||||
From sale two months old | 12558 | 14763 | 16716 | ||||
From sale one month old | 37076 | 43586 | 49352 | ||||
Total collection from receivables | 49634 | 58349 | 66068 | ||||
2) | June and July have cash deficits and to maintain the minimum cash balance borrowings are required to the | ||||||
extent of $12343 and $11728 respectively. Arrangements for a line of credit is to be initiated early. |