SPM 341 A-Sports Admine Mind lap-Cengage Lea × -+ icnt/ui/index.html?nbId=607674
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SPM 341 A-Sports Admine Mind lap-Cengage Lea × -+ icnt/ui/index.html?nbId=607674&nbNodeld-222524; 53 2801SBN-9781 30563 597 5.18parentld-222525089 MINDTAP Assignment 15-Working Capital Management Due Today at 11-59 PM CST 6. Cash budget AaAa Henderson 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: Henderson's total sales for each month were first calculated in the sales budget and are reflected on the first line of the cash budget. Henderson's sales are made on credit with terms of 2/10, net 30, Henderson's experience is that 20% is collected from customers who take advantage of the discount, 70% 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 45% of Henderson's finished product. The purchases are generally made one month in advance of the sale, and Henderson pays its suppliers in 30 days. Accordingly, if July sales are forecasted at $1,100 million, then purchases during June would be $495 ($1,100 million x 0.45), and this amount would be paid in July. Other cash expenses include wages and salaries at 20% 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 Henderson's targeted cash balance is $200, and the estimated cash on hand on July 1 is · . $241 Type here to searchExplanation / Answer
( $ millions) May June July August September October November December Credit Sales 950 980 1000 1010 1030 1050 1080 1100 Credit Purchases 450 455 464 473 486 495 0 July August September October November December Cash receipts : Collections from this month's sale 196 198 202 206 212 216 Collections from previuos month's sale 686 700 707 721 735 756 Collections from sale two months previously 95 98 100 101 103 105 Total cash receipts 977 996 1009 1028 1050 1077 Cash disbursements: Payment for credit purchases 450 455 464 473 486 495 Wages and salaries 200 202 206 210 216 220 Rent 40 40 40 40 40 40 Other expenses - 5% of sales 50 51 52 53 54 55 Tax payments 59 61 Purchase of new plant 1000 Total cash disbursements 799 748 1762 837 796 810 Net cash flow (Receipts - disbursements) 178 248 -753 191 254 267 Beginning cash balance 241 419 667 -86 105 359 Ending cash balance 419 667 -86 105 359 626 Target minimum cash balance 200 200 200 200 200 200 Surplus / (shortfall) 219 467 -286 -95 159 426 Henderson 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 Henderson will ___________ $ _______ to end the year with a cash balance of $426m and a cash surplus of $ 889 m . Henderson will need a credit line of atleast $286m to cover the month with the greatest shortfall , and the financial managers can tell the bank that they will be able to invest upto $2,034m in shrt term marketable securities.
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