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The Thunder Dan's Corporation's purchases from suppliers in a quarter are equal to 65 percent of...
The Thunder Dan's Corporation's purchases from suppliers in a quarter are equal to 65 percent of the next quarter's forecasted sales. The payables period is 60 days. Beginning accounts payables is $200. Wages, taxes, and other expenses are 16 percent of sales, and interest and dividends are $60 per quarter. No capital expenditures are planned. Sales for the first quarter of the following year are projected at $720. The receivables period is 45 days. Beginning accounts receivables is $150. Initial cash balance is $70, the corporation requires a minimum cash balance of $50. The projected quarterly sales are: Q1, $690; Q2, $660; Q3 $590; Q4, $560. Based on the information, please construct the cash budget table for the following 4 quarters. Please indicate if the short term financing is needed.
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Expert Solution
| Formula | Q1 | Q2 | Q3 | Q4 | Q5 | |
| Sales (S) | 690.00 | 660.00 | 590.00 | 560.00 | 720.00 | |
| Purchases (P) | (Sn+1*65%) | 429.00 | 383.50 | 364.00 | 468.00 | |
| Inflow: | ||||||
| Beginning receivables (BR) | 150.00 | 345.00 | 330.00 | 295.00 | ||
| Sales (S) | 690.00 | 660.00 | 590.00 | 560.00 | ||
| Cash collection (CC) | (BR + 0.5*S) | (495.00) | (675.00) | (625.00) | (575.00) | |
| Ending receivables (A) | (BR+S+CC) | 345.00 | 330.00 | 295.00 | 280.00 | |
| Outflow: | ||||||
| Beginning payables (BP) | 200.00 | |||||
| Payment of accounts (PA) | (2/3*Pn) + (1/3*Pn-1) | 486.00 | 398.67 | 370.50 | 433.33 | |
| Wages, taxes & others (O) | (16%*S) | 110.40 | 105.60 | 94.40 | 89.60 | |
| Long-term financing expenses (LTE) | 60.00 | 60.00 | 60.00 | 60.00 | ||
| Total cash disbursements (B) | (PA + O + LTE) | 656.40 | 564.27 | 524.90 | 582.93 | |
| Cash inflow (CI) | (A-B) | (311.40) | (234.27) | (229.90) | (302.93) | |
| Beginning cash balance (BC) | 70.00 | (241.40) | (475.67) | (705.57) | ||
| Cash inflow (CI) | (311.40) | (234.27) | (229.90) | (302.93) | ||
| Ending cash balance (EC) | (BC + CI) | (241.40) | (475.67) | (705.57) | (1,008.50) | |
| Minimum cash balance (MCB) | (50.00) | (50.00) | (50.00) | (50.00) | ||
| Surplus/(deficit) | (EC + MCB) | (291.40) | (525.67) | (755.57) | (1,058.50) |
The company requires short-term financing as it is ending Q4 with a deficit of 1,058.50
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