Reference no: EM132959898

Questions -

Q1. The financial manager of Judy Company wants to determine the amount of cash outlays to be spent for the next period. He asked the help of the accountant and the latter provided a cash budget for the next year. According to the computations, the company would be incurring cash expenses of $6,612,500 per month. The financial manager has estimated a cost of $40 per transaction in case non-cash asset is converted to cash. The firm's opportunity cost ratio is 12%.

a. How much is the optimum cash balance?

b. How much is the average cash balance?

c. What is the number of conversion made during the year?

d. What is the total cash cost?

Q2. Classic Inc's budgeted sales for the coming year are $40,500,000 million of which 80% are expected to be credit sales at terms of n/30. Classic Inc. estimates that a proposes relaxation of credit standards would increase credit sales by 20% and increase the average collection period form 30 days to 40 days. Based on a 360-day year, the proposed relaxation of credit standards would result in an expected increase in the average accounts receivable balance of how much?