Wickford Company's financial managers are meeting with the company's bank to renew their line of credit and discuss their investment needs. They have prepared the company's operating cash budget for the last six months of the year. The following budget assumptions were used to construct the budget: Wickford's total sales for each month were first calculated in the sales budget and are reflected on the first line of the cash budget. Wickford's sales are made on credit with terms of 2/10, net 30. Wickford's experience is that 15% is collected from customers who take advantage of the discount, 75% is collected in the second month, and the last 10% is collected in the third month after the sale. The budget assumes that there are no bad debts. The cost of materials averages 55% of Wickford's finished product. The purchases are generally made one month in advance of the sale, and Wickford pays its suppliers in 30 days. Accordingly, if July sales are forecasted at $1,100 million, then purchases during June would be $605 ($1,100 million x 0.55), and this amount would be paid in July Other cash expenses include wages and salaries at 16% of sales, monthly rent of $40 million, and other expenses at 5% of sales. Estimated tax payments of $59 million and $61 million are required to be paid on July 15 and October 15, respectively. In addition, a $1,000 million payment for a new plant must be made in September. Assume that wiodord's targeted cash balance is $200, and the estimated cash on hand on July 1 is $178. Wickford Company Cash Budget For the Six Months Ended December 31, Year 1 ($ millions) May July December $950 Credit sales Credit purchases June $980 550 $1,000 August September $1,010 $1,030 567 578 October $1,050 594 November $1,080 605 $1,100 July August September October November December 154 148 750 159 162 788 151 758 100 $1,009 810 98 103 105 $996 $1,028 $1,050 $1,077 550 556 594 162 Cash receipts Collections from this month's sales Collections from previous month's sales Collections from sales two months previously Total cash receipts Cash disbursements Payments for credit purchases Wages and salaries Rent Other expenses Taxes Payment for plant construction Total cash disbursements Net cash flow (Receipts - disbursements) Beginning cash balance Ending cash balance Target (minimum) cash balance 567 165 40 173 505 176 40 40 54 $859 1,000 $1,824 $809 $861 $876 $118 $187 -5815 $128 5201 178 296 $296 200 -$204 $189 -204 -$15 200 200 200 1,000 $859 $1,824 $861 $876 Wages and salaries Rent Other expenses Taxes Payment for plant construction Total cash disbursements Net cash flow (Receipts - disbursements) Beginning cash balance Ending cash balance Target (minimum) cash balance Surplus (shortfall) cash $118 $187 -$815 $189 - 204 178 $128 -332 -$204 296 $296 200 $96 $483 200 $283 -$15 200 $201 -15 $186 200 -$14 200 -$404 -$215 Use the information provided in the budget to complete the following sentences. Widford Company will be able to invest in short-term marketable securities in some months and will need to borrow to cover cash requirements in others. In the last six months of the year, Wickford will to end the year with a cash of $ and a cash of $ Wickford Company will want a spend at least $ to cover the month with the greatest shortfall, and the financial managers can tell the bank to expect that they will be able generates in short-term marketable securities. Use the information provided in the budget to complete the following sentences. wickford Company will be able to invest in short-term marketable securities in some months and will need to borrow to cover cash requirements in others. In the tast six months of the year, Wickford will to end the year with a cash of $ and a cash of $ Wickford Company will want a credit line of at 1,077 to cover the month with the greatest Shortfall, and the financial managers can tell the bank to expect that they will be able to invest up to s in short-term marketable securities 14M 186M Use the information provided in the budget to complete the following sentences. Widdord Company will be able to invest in short-term marketable securities in some months and will need to borrow to cover cash requirements in others. In the last six months of the year, Wickford will $ to end the year with a cash of $ and a cash of $ Widford Company will want a credit line of at least to cover the mor balance breatest shortfall, and the financial managers can tell the bank to expect that they will be able to invest up to $ in short-term marketat deficit Use the information provided in the budget to complete the following sentences. 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In the last six months of the year, Wickford will $ to end the year with a cash of $ and a cash of $ Wickford Company will want a credit line of at least to cover the month with the greatest shortfall, and the surplus hagers can tell the bank to expect that they will be able to invest up to $ in short-term marketable securities shortfall Use the information provided in the budget to complete the following sentences. Wickford Company will be able to invest in short-term marketable securities in some months and will need to borrow to cover cash requirements in others. In the last six months of the year, Wickford will $ to end the year with a cash and a cash of $ Wickford Company will want a credit line of at least to cover the month with the greatest shortfall, and the financial managers can tell 186M to expect that they will be able to invest up to $ in short-term marketable securities 2011 14M 176 Use the information provided in the budget to complete the following sentences. Widdord Company will be able to invest in short-term marketable securities in some months and will need to borrow to cover cash requirements in others. In the last six months of the year, Wickford will to end the year with a cash of $ and a cash of $ Wickford Company will want a credit line of at least $ to cover the month with the greatest shortfall, and the financial managers can tell the bank to expect that they will be able to invest up to $ 51st-term marketable securities 1,298 1,015M 532M Use the information provided in the budget to complete the following sentences Wickford Company will be able to invest in short-term marketable securities in some months and will need to borrow to cover cash requirements in others. In the last six months of the year, Widford will to end the year with a cash of $ and a cash of $ Wickford Company will want a credit line of at least $ to cover the month with the greatest shortfall, and the financial managers can tell the bank to expect that they will be able to invest up to in short-term marketable securities 176M SISM 283M 1.298M