Assume that sales and expenses forecasts for months April, May, June, and July are as follows. 20%
Question:
Assume that sales and expenses forecasts for months April, May, June, and July are as follows. 20% of all sales in a month are paid in the same month, 60% are paid in the next month, and 20% are paid in the second month after. All expenses in a month are paid in the same month. There is a $20,000,000 minimum required cash balance at the end of each month, and any shortage from this minimum requirement will be covered by obtaining a loan. Any excess over $20,000,000 will be used to reduce or pay off the cumulative loan. The initial cash balance in June is $6,000,000 and there is no cumulative loan at this time. The monthly prorated tax rate is 2%, and the monthly interest rate on the cumulative loan is 1%.
Requirements:
1. Prepare cash budget proforma for months of June and July.
2. Explain your work in detail by providing a deep analysis of the results of the cash budget proforma for the months of June and July.
Mathematical Statistics with Applications in R
ISBN: 978-0124171138
2nd edition
Authors: Chris P. Tsokos, K.M. Ramachandran