PROBLEMS Excel is recommended for many of the problems. Fill in the missing cell

Question

PROBLEMS Excel is recommended for many of the problems. Fill in the missing cells in the following cash budget. Explain the implications of the calculated net cash flows. Assume that the firm does not have a target cash balance 1. Cash Budget ITEM Cash receipts JUNE $375 $295 JULY 345 $425 AUGUST $450 S535 = Net cash flow +Beginning cash = Ending cash $35 Suppose that this month a firm earned a net cash flow of $800. If monthly cash receipts equaled $1,200, how much were cash disbursements? 2. 85 3. Fill in the missing cells in the following cash budget. Explain the implications of the calculated net cash flows. Answers question 3 $450 Net cash flow $200 $300 + Beginning cash

Explanation / Answer

Net Cash Flow June = (375-295) = 80

Ending Cash June= Beginning Cash + Net Cash Flow = 35 + 80 = 115

Net Cash Flow July = (345-425) = -80

Beginning Cash July = Ending Cash June = 115

Ending Cash July = 115-80 = 35

Net Cash Flow August = 450-535 = -85

Beginning Cash August = 35

Ending Cash August = -85+35 = -50 ( Cash Deficit)

As the ending cash in August is in deficit, the firm must raise external money to bridge the deificit. This could be through Debt or Equity route.

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