rojected following for Ja ary 2019 to August 2019. The sales of Green PLC are 30% in cash and the remai der is on a credit for 1 month, It also expects cash receipts from its subsidiaries worth £40,000 in March, £26,000 in April, and £27,000 in June. The firm pays 20% in cash for all its purchases. The remaining 40% is paid i the following month and the last 40% is paid 2 months later. Month Sales Purchases January February March 600,000 400,000 s00,000 600,000 500,000 700,000 s00,000 350,000 450,000 April May 475,000 300,000 450,000 June July August 750,000 s00,000 300,000 350,000 Wages and salaries amount to 25% of the sales in the preceding month. They so need to pay rent of £15,000 every month. The payment for a new machinery ill be due in March for £45,000 and will be paid in cash. They have to pay interin xof £45,000 in May. The firm also expects to pay dividend of £26,000 in March and receive a cash bsidy of £37,000 from government in June. Assuming that the firm has a cash balance of £32,000 at the beginning of January
rojected following for Ja ary 2019 to August 2019. The sales of Green PLC are 30% in cash and the remai der is on a credit for 1 month, It also expects cash receipts from its subsidiaries worth £40,000 in March, £26,000 in April, and £27,000 in June. The firm pays 20% in cash for all its purchases. The remaining 40% is paid i the following month and the last 40% is paid 2 months later. Month Sales Purchases January February March 600,000 400,000 s00,000 600,000 500,000 700,000 s00,000 350,000 450,000 April May 475,000 300,000 450,000 June July August 750,000 s00,000 300,000 350,000 Wages and salaries amount to 25% of the sales in the preceding month. They so need to pay rent of £15,000 every month. The payment for a new machinery ill be due in March for £45,000 and will be paid in cash. They have to pay interin xof £45,000 in May. The firm also expects to pay dividend of £26,000 in March and receive a cash bsidy of £37,000 from government in June. Assuming that the firm has a cash balance of £32,000 at the beginning of January
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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Transcribed Image Text:P4-12 Cash budget: Advanced The Green PLC has projected following unit sales for Janu-
ary 2019 to August 2019. The sales of Green PLC are 30% in cash and the remain-
der is on a credit for 1 month, It also expects cash receipts from its subsidiaries
worth £40,000 in March, £26,000 in April, and £27,000 in June.
The firm pays 20% in cash for all its purchases. The remaining 40% is paid in
the following month and the last 40% is paid 2 months later.
Month
Sales
Purchases
January
February
600,000
40,000
500,000
350,000
March
600,000
450,000
April
500,000
700,000
800,000
475,000
May
June
300,000
450,000
July
August
750,000
s00,000
300,000
350,000
Wages and salaries amount to 25% of the sales in the preceding month. They
also need to pay rent of £15,000 every month. The payment for a new machinery
will be due in March for £45,000 and will be paid in cash. They have to pay interim
tax of £45,000 in May.
The firm also expects to pay dividend of £26,000 in March and receive a cash
subsidy of £37,000 from government in June.
a. Assuming that the firm has a cash balance of £32,000 at the beginning of January,
estimate the end-of-month closing cash halances for each month, March to August.
b. The directors decide that the cash balance should be maintained ar £20,000 at
any given point of time. Determine the required total financing or excess cash
balance for each month, March to August.
c. Do you think that Green PLC will need an overdraft facility for the period from
March to August? What overdraft limit should they ask for while requesting a line
of credit from banks?
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