4. Packaged Corporations would like you to prepare a cash budget for June - Augu

Question

4. Packaged Corporations would like you to prepare a cash budget for June - August. The sales forecast (in thousands) is shown below: April May June July August September Sales 2,000 2,200 2,500 3,000 3,600 3,000 Customer typically pay as follows: 15% in the month of sale, 70% 1 month after the sale, 13% 2 months after the sale. 2% of the customers never pay. Purchases total 60% fo sales and are made in the month of sale but paid for 30 days after purchase. Other monthly expenses total $1,000 a mont. Package has a target cash balance of $100 which is on hand June 1. Will they need a line of credit and if so how large? 4. Packaged Corporations would like you to prepare a cash budget for June - August. The sales forecast (in thousands) is shown below: April May June July August September Sales 2,000 2,200 2,500 3,000 3,600 3,000 Customer typically pay as follows: 15% in the month of sale, 70% 1 month after the sale, 13% 2 months after the sale. 2% of the customers never pay. Purchases total 60% fo sales and are made in the month of sale but paid for 30 days after purchase. Other monthly expenses total $1,000 a mont. Package has a target cash balance of $100 which is on hand June 1. Will they need a line of credit and if so how large?

Explanation / Answer

Yes They need line of Credit

June July Aug. 1st Collection $375.00 $450.00 $540.00 2nd Collection $1,540.00 $1,750.00 $2,100.00 3rd Collection $260.00 $286.00 $325.00 Total Receipt $2,175.00 $2,486.00 $2,965.00 Payment for Purchase $1,320.00 $1,500.00 $1,800.00 Expense $1,000.00 $1,000.00 $1,000.00 Total Payment $2,320.00 $2,500.00 $2,800.00 Net Cash Bal. -$145.00 -$14.00 $165.00 Add: Opening Bal. $1,000.00 $855.00 $841.00 Avail. Cash $855.00 $841.00 $1,006.00 Required Min. bal. $1,000.00 $1,000.00 $1,000.00 Surplus/Shortage -$145.00 -$159.00 $6.00

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