# Question: Given the following information construct the firm s cash budget for

Given the following information, construct the firm’s cash budget for the given months and answer the questions.

• All sales are for credit and collections occur after 30 days.

• A $100,000 Treasury bill matures in March.

• Monthly fixed disbursements are $25,000.

• Variable disbursements are 40 percent of sales and occur one month prior to sales. (Variable cash disbursements are given for April.)

• A tax payment of $30,000 is due in April.

• A payment of $50,000 is to be received in February.

• The initial cash is $20,000.

• The minimum required cash balance is $10,000.

a. At the end of March, what are the firm’s (1) accounts receivable, (2) marketable securities, and (3) accounts payable?

b. What is the maximum amount that the firm may have to borrow? If your answer is “None,” give a reason that verifies your answer.

c. If the firm used accelerated depreciation instead of straight-line depreciation, how would that affect the cash budget?

• All sales are for credit and collections occur after 30 days.

• A $100,000 Treasury bill matures in March.

• Monthly fixed disbursements are $25,000.

• Variable disbursements are 40 percent of sales and occur one month prior to sales. (Variable cash disbursements are given for April.)

• A tax payment of $30,000 is due in April.

• A payment of $50,000 is to be received in February.

• The initial cash is $20,000.

• The minimum required cash balance is $10,000.

a. At the end of March, what are the firm’s (1) accounts receivable, (2) marketable securities, and (3) accounts payable?

b. What is the maximum amount that the firm may have to borrow? If your answer is “None,” give a reason that verifies your answer.

c. If the firm used accelerated depreciation instead of straight-line depreciation, how would that affect the cash budget?

## Relevant Questions

A firm needs $1 million in additional funds. These can be borrowed from a commercial bank with a loan at 6 percent for one year or from an insurance company at 9 percent for five years. The tax rate is 30 percent. a. What ...To increase sales, management is considering reducing its credit standards. This action is expected to increase sales by $125,000. Unfortunately, it is anticipated that 7 percent of the sales will be uncollectible. Accounts ...What is the compound yield on a Treasury bill that costs $98,760 and will be redeemed for $100,000 after 90 days? How much additional return would you have to earn if you had bought $100,000 worth of 90-day commercial paper ...Trade credit may be stated as n60 plus 18 percent on the balance outstanding after two months. What is the cost of this credit? What are the repayment schedules for each of the following five-year, 10 percent $10,000 term loans? a. equal annual payments that amortize (retire) the principal and pay the interest owed on the declining balance b. equal ...Post your question