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Cash budget and short-term financing plan

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Reference no: EM133062406

Use the following information to work out a cash budget and short-term financing plan. Assume marketable securities cannot be repurchase until next year but can be sold in any proportion.

Cash start 1st quarter: 20.3

Sales 4th quarter last year: 250

Collections on sales in current period: 50%

Collections on sales in previous period: 50%

Minimum operating balance: 20.0

Quarter

1st

2nd

3rd

4th

Sales

130

180

120

400

Payments of accounts payable

60

50

80

50

Increase in inventory

40

40

45

50

Labor & other expenses

30

30

30

30

Capital expenses

100

10

10

10

Taxes, interest, and dividends

20

20

20

20

Sources of short-term financing:

Bank loan - Up to 50. Interest 2% per quarter

Stretching payables - Up to 50. Loses 4% on discounts. Has to pay next quarter

Sell marketable securities - Value 25. Loses 3% on dividends

Reference no: EM133062406

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