(a) The cash budget is indispensable to the financial man needs of the firm and, accordingly, in planning its short-t measure of liquidity than traditional measures, such as your reasoning. (b) Kiddy Company had credit sales of RM1,000,000, R November and December 2021, respectively. The compa through March of 2022 are as follows:
(a) The cash budget is indispensable to the financial man needs of the firm and, accordingly, in planning its short-t measure of liquidity than traditional measures, such as your reasoning. (b) Kiddy Company had credit sales of RM1,000,000, R November and December 2021, respectively. The compa through March of 2022 are as follows:
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Please assist to answer Q7 b) with detail explanation and work out.
Transcribed Image Text:5. (a) The cash budget is indispensable to the financial manager in determining the short-term cash
needs of the firm and, accordingly, in planning its short-term financing. Is the cash budget a better
measure of liquidity than traditional measures, such as the current ratio and quick ratio? Explain
your reasoning.
(b) Kiddy Company had credit sales of RM1,000,000, RM1,500,000 and RM800,000 in October,
November and December 2021, respectively. The company's credit sales projections for January
through March of 2022 are as follows:
January – RM3,000,000
February – RM2,400,000
March – RM2,000,000
Kiddy Company has normally collected 60% of its credit sales in the month following the sale, 30%
in the second following month and 10% in the third month. Assuming this collection pattern
continues, prepare a schedule of cash receipts from receivables collection for the period January
through March of 2022 (for the month of January, February and March).
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