Sales for the first quarter of the following year are projected at $195 million. Accounts receivable at the beginning of the year were $77 million. Wildcat has a 45-day collection period.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Wildcat, Inc., has estimated sales (in millions) for the next four quarters as follows: |
| Q1 | Q2 | Q3 | Q4 | |||||||||
| Sales | $ | 180 | $ | 200 | $ | 220 | $ | 250 |
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Sales for the first quarter of the following year are projected at $195 million. |
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Wildcat’s purchases from suppliers in a quarter are equal to 50 percent of the next quarter’s |
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Wildcat plans a major capital outlay in the second quarter of $85 million. Finally, the company started the year with a $81 million cash balance and wishes to maintain a $40 million minimum balance. |
| b-1. |
Complete the following short-term financial plan assuming that Wildcat maintains a minimum cash balance of $20 million. (Enter your answers in millions. Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| WILDCAT, INC. | ||||
| Short-Term Financial Plan | ||||
| (in millions) | ||||
| Q1 | Q2 | Q3 | Q4 | |
| Target cash balance | $20.00 | $20.00 | $20.00 | $20.00 |
| Net |
16.00selected answer correct | -61.00selected answer correct | 26.00selected answer correct | 54.00selected answer correct |
| New short-term investments | -17.22selected answer correct | 0.00selected answer correct | -45.35selected answer incorrect | -54.91selected answer correct |
| Income on short-term investments | 1.22selected answer correct | 1.56selected answer correct | 0.00selected answer incorrect | 0.91selected answer correct |
| Short-term investments sold | 0.00selected answer correct | -78.22selected answer incorrect | 0.00selected answer correct | 0.00selected answer correct |
| New short-term borrowing | 0.00selected answer correct | 0.00selected answer correct | 0.00selected answer correct | 0.00selected answer correct |
| Interest on short-term borrowing | 0.00selected answer correct | 0.00selected answer correct | 0.56selected answer incorrect | 0.00selected answer correct |
| Short-term borrowing repaid | 0.00selected answer correct | 0.00selected answer correct | 18.78selected answer incorrect | 0.00selected answer correct |
| Ending cash balance | $20.00selected answer correct | $20.00selected answer correct | $20.00selected answer correct | $20.00selected answer correct |
| Minimum cash balance | -20.00 | -20.00 | -20.00 | -20.00 |
| Cumulative surplus (deficit) | $0.00selected answer correct | $0.00selected answer correct | $0.00selected answer correct | $0.00selected answer correct |
| Beginning short-term investments | $61.00selected answer correct | $78.22selected answer correct | $0.00selected answer incorrect | $45.35selected answer correct |
| Ending short-term investments | $78.22selected answer correct | $(18.78)selected answer incorrect | $45.35selected answer correct | $100.25selected answer correct |
| Beginning short-term debt | $0.00selected answer correct | $0.00selected answer correct | $(18.78)selected answer incorrect | $0.00selected answer correct |
| Ending short-term debt | $0.00selected answer correct | $0.00selected answer correct | $0.00selected answer correct |
$0.00 |
| b-2. |
What is the net cash cost for the year under this target cash balance? (Enter your answer in millions. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
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