Develop a cash budget based on the following information about a preschool: Revenue Tuition fee: $100,000...

Develop a cash budget based on the following information about a preschool:

Revenue
Tuition fee: $100,000 paid monthly
Event income: $50,000 by Thanksgiving
Foundation support: $200,000 semiannually, May and November

Expense
Salary and wages: $80,000 monthly
Rent and insurance: $100,000 in January
Supply and food: $10,000 monthly
Administration and fundraising: $10,000 monthly

Assume the board of directors does not allow for short-term borrowing and that the cash safety margin is $80,000. How much operating reserve or liquidity should the school have to embark on the preschool program?

Expert Solution

Based on the given data, pls find below workings:

It could be observed that at any point of time, the highest negative balance is -ve $ 100000; Over this, the Board of Directors have stipulated that the cash safety margin need to be $ 80000, since there is no short-term borrowing facility; Hence, based on the below workings, it is required to maintian operating reserve of $ 180000, for the school before embarking on the PreShcool program.

jeff jeffy answered 1 year ago

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