Management wants to know if there will be a need for short-term financing in February. Essential information is as follows:
a. Estimated sales for January and February are $1 million and $800,000, respectively.
b. Sixty percent of sales are for cash and 40 percent are credit sales that are collected the next month.
c. Cash disbursements that vary with sales are 40 percent of sales.
d. Fixed operating disbursements are $300,000 a month.
e. Depreciation expense is $50,000 a month.
f. A tax payment of $100,000 is due in January.
g. A bond payment of $300,000 is owed and will be due in February.
h. The cash balance at the beginning of January is $12,000.
i. Management seeks a minimum cash balance of $10,000.
j. December credit sales were $100,000.

  • CreatedMarch 19, 2015
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