Aplia: Student Ouestion × G mooney prefers to keep × Y e 7, Cash Budget Aa Aa Tr

Question

Aplia: Student Ouestion × G mooney prefers to keep × Y e 7, Cash Budget Aa Aa Tr x, G collections oner-he Ne Collecticns Cver The Ne x × CSecure hitps://courses.aplia.com/af/servlet/quiziquiz z8quiz probGuid-ONAPCOAB010100000041c 2-00398ck-m 1530363924865 UAAA6UD30163D291BU39L60000 Do No Harm: 5 Attempts:*> 5. Cash budget The cash budget is considered the primary forecasting tool when fims try to estimate their cash tlows and iqure out it they are "kely to need a?ditional cash flows or to generate surplus cash Consider the case of Mooney Equ pment: Mooney Equipment is putting together its cash budget for the following year and has forecasted expected cash collections aver the next five quarters (one year plus the first quarter af the next year). The cash callection estimates are based on sales projections and expected collection of recelvables. The sales and cash collection estimates are shown in the following table (in millions of dollars): Q1 Q2 24 Q5 23 $1,430 $1,730 $1,780 $1,580 $1,830 Sales Total cash collectians $1,43 $1,480 $1,530 $1,530 You also have the rollowing infarmation about Maoney Equipment * In any given period. Mooney's purchases from suppliers generally account for 72% of the expected sales in the next period, and wages, supplies, and taxes are expected to be 15% of next penod's sales. In the third quarter, Maoney expects to expand one of its plants, which will require an additianal $1,072 million investment. Every quarter, Mooney pays $55 million in interest and dividend payments to lang-term debt and equity investors . Mooney prefers to keep a minimum target cash balance f at least $14 million at all times. Using the preceding information, answer the fellowing questions: What is the net cash inflow that Mooney expects in the first quarter (Q1)? 52:01 :13 AM Type here to search

Explanation / Answer

This question involves certain calculations to be done before we start answering - (Amounts in million $)

Answering the questions now,

True or False:

The given statement is absolutely FALSE because income statement and cash budget are not same. Cash budget is concerned only with the cash inflows and outflows and it records the movement in cash when it actually occurs. Income statement is prepared on accrual basis and revenue and expenses in income statement are booked as and when they accrue and not when they are actually paid or received. Income statement considers non cash expenses like depreciation and amortization while cash budget is strictly restricted to cash expenses. Similarly income statement considered non cash revenue whereas cash budget does not. There is no rule as to prepare cash budget daily or monthly, it is only advisable to do so and depends on the company's internal policies. Similarly it is not necessary that income statements be prepared only semi annually.

Particulars Q 1 Q 2 Q 3 Q 4 Cash collections (inflow) 1430 1480 1530 1530 Purchases (72% of next month sales) -1246 -1282 -1138 - 1138 Wages, Salaries & Taxes (15% of next month sales) -260 -267 -237 -275 Additional expenditure -1072 Interest and dividend -55 -55 -55 -55 Net cash balance -131 -124 -972 -118

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.