ZZZ Business has made the following monthly estimates of cash receipts and cash

Question

ZZZ Business has made the following monthly estimates of cash receipts and cash disbursements when preparing cash budgets for the next twelve months. ZZZ has beginning cash on hand of $20,000 and wants to maintain this minimum cash level throughout the next year.

Cash            Cash
Month        Receipts        Disbursements
January       $100,000        $100,000   
February    $90,000        $110,000
March           $80,000        $110,000
April            $100,000        $150,000
May            $120,000        $180,000
June           $160,000        $180,000
July            $200,000        $180,000   
August       $250,000        $180,000   
September $250,000        $150,000
October     $200,000        $110,000
November $140,000        $100,000   
December $100,000        $100,000

1) Determine whether or not ZZZ will have a cash need during the next year.

2) If the company does need cash, in which month will it need the cash?

3) What is the most cash the company will need to borrow during the year?

4) Will the company have paid back all of its borrowings by the end of the year?

Please show calculations so I know how you came up with the answers. I am really confused with this answer. Thank you!

Explanation / Answer

1 Since,the company is having closing cash balance of $160000; it need not require additional cash for the next year. Month January February March April May June July August September October November December Opening balance 20000 20000 20000 20000 20000 20000 20000 20000 20000 30000 120000 160000 Cash receipts 100000 90000 80000 100000 120000 160000 200000 250000 250000 200000 140000 100000 Loan taken 20000 30000 50000 60000 20000 -20000 -70000 -90000 Cash available 120000 130000 130000 170000 200000 200000 200000 200000 180000 230000 260000 260000 Less Cash disbursement 100000 110000 110000 150000 180000 180000 180000 180000 150000 110000 100000 100000 Closing balance 20000 20000 20000 20000 20000 20000 20000 20000 30000 120000 160000 160000 2 The company needed cash for the months: February,march,april,may and june 3 Company borrowed most cash during the month of May $60000 4 Yes, the company has paid the borrowings

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