Bundle: Fundamentals of Financial Management, Loose-leaf Version, 14th + LMS Integrated for MindTap Management, 2 terms (12 months) Printed Access Card
14th Edition
ISBN: 9781305777217
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 16, Problem 11SP
a.
Summary Introduction
To prepare: A monthly cash budget for the last 6 months of 2015.
Working capital:
Working capital speculation is the measure of cash, require to extend business, meet here and now business obligations and cover costs of doing business.
Cash budget:
A money spending plan is an estimation of the money inflows and outpourings for a business over a particular timeframe. This financial plan is utilized to evaluate whether the substance has adequate money to work.
b.
Summary Introduction
To prepare: The monthly estimated required financing or excess fund.
c.
Summary Introduction
To determine: The effect on the cash budget, if cash budget is prepared under the assumptions and steps which make the financial requirement valid under the assumptions.
d.
Summary Introduction
To determine: The changes in the current and debt ratio during the year with calculation and explain whether the changes in the ratios affect the ability of the firm to get bank credit.
Summary Introduction
To determine: The sensitivity analysis that shows the effect of the two factors on the maximum loan requirement.
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Which of the following statements Is false with respect to the sales budget Including a schedule of expected cash collections?
Multiple Choice
Estimating cash collections plays a role in preparing a cash budget.
Although the estimated amounts of sales and cash collections may differ from one another on a month-to-month or quarterly basis, these two estimates must equal each other on an annual basis.
Estimating sales ultimately impacts the estimated ending retained earnings on the balance sheet.
Estimating cash collections also enables managers to estimate accounts receivable on the balance sheet.
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Help me answer Nos. 2-5 only please tutors. Thank you
The Chapter 8 Form worksheet is to be used to create your own worksheet version of the Review Problem in the text.
Requirement 2:
The company has just hired a new marketing manager who insists that unit sales can be dramatically increased by dropping the selling price from $8 to $7. The marketing manager would like to use the following projections in the budget:
a. What are the total expected cash collections for the year under this revised budget?
b. What is the total required production for the year under this revised budget?
c. What is the total cost of raw materials to be purchased for the year under this revised budget?
d. What are the total expected cash disbursements for raw materials for the year under this revised budget?
e. After seeing this revised budget, the production manager cautioned that due to the current production constraint, a complex milling machine, the plant can produce no more than 90,000 units in any one quarter. Is this a potential problem?
Chapter 16 Solutions
Bundle: Fundamentals of Financial Management, Loose-leaf Version, 14th + LMS Integrated for MindTap Management, 2 terms (12 months) Printed Access Card
Ch. 16 - What are some pros and cons of holding high levels...Ch. 16 - Prob. 2QCh. 16 - What are the two definitions of cash, and why do...Ch. 16 - Prob. 4QCh. 16 - What are the four key factors in a firm's credit...Ch. 16 - Prob. 6QCh. 16 - Why is some trade credit called free while other...Ch. 16 - Define each of the following loan terms, and...Ch. 16 - Why are accruals called spontaneous sources of...Ch. 16 - Indicate using a (+), (), or (0) whether each of...
Ch. 16 - CASH CONVERSION CYCLE Primrose Corp has 15million...Ch. 16 - RECEIVABLES INVESTMENT Lamar Lumber Company has...Ch. 16 - COST OF TRADE CREDIT AND BANK LOAN Lamar Lumber...Ch. 16 - CASH CONVERSION CYCLE Zocco Corporation has an...Ch. 16 - RECEIVABLES INVESTMENT McDowell Industries sells...Ch. 16 - WORKING CAPITAL INVESTMENT Prestopino Corporation...Ch. 16 - CASH CONVERSION CYCLE Christie Corporation is...Ch. 16 - CURRENT ASSETS INVESTMENT POLICY Rentz Corporation...Ch. 16 - Prob. 9PCh. 16 - CASH BUDGETING Helen Bowers, owner of Helens...Ch. 16 - Prob. 11SPCh. 16 - MANAGING CURRENT ASSETS Dan Barnes, financial...
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- CASH BUDGETING Rework problem 15-10 using a spreadsheet model. After completing parts a through d, respond to the following: If Bowers customers began to pay late, collections would slow down, thus increasing the required loan amount. If sales dedined, this also would have an effect on the required loan. Do a sensitivity analysis that shows the effects of these two factors on the maximum loan requirement. 15-10 CASH BUDGETING Helen Bowers, owner of Helens Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2016 and 2017. May 2016 180,000 June 180,000 July 360,000 August 540,000 September 720,000 October 360,000 November 360,000 December 90,000 January 2017 180,000 Estimates regarding payments obtained from the credit department are as follows: collected within the month of sale, 10%; collected the month following the sale. 75%; collected the second month following the sale, 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials: May 2016 90,000 June 90,000 July 126,000 August 882,000 September 306,000 October 234,000 November 162,000 December 90,000 General and administrative salaries are approximately 27,000 a month. Lease payments under long-term leases are 9,000 a month. Depredation charges are 36,000 a month. Miscellaneous expenses are 2,700 a month. Income tax payments of 63,000 are due in September and December. A progress payment of 180,000 on a new design studio must be paid in October. Cash on hand on July 1 will be 132,000, and a minimum cash balance of 90,000 should be maintained throughout the cash budget period. a. Prepare a monthly cash budget for the last 6 months of 2016. b. Prepare monthly estimates of the required financing or excess fundsthat is, the amount of money Bowers will need to borrow or will have available to invest. c. Now suppose receipts from sales come in uniformly during the month (that is, cash receipts come in at the rate of 1/30 each day), but all outflows must be paid on the 5th. Will this affect the cash budget? That is, will the cash budget you prepared be valid under these assumptions? If not, what could be done to make a valid estimate of the peak financing requirements? No calculations are required, although if you prefer, you can use calculations to illustrate the effects. d. Bowers sales are seasonal; and her company produces on a seasonal basis, just ahead of sales. Without making any calculations, discuss how the companys current and debt ratios would vary during the year if ail financial requirements were met with short-term bank loans. Could changes in these ratios affect the firms ability to obtain bank credit? Explain. e. f. g. h.arrow_forwardPlease Fast answer and do not give solution in image formatarrow_forwardPlease explain correct option also.arrow_forward
- A cash flow budget can be used to A. estimate when and how much money will need to be borrowed during the year B. estimate when and how much debt can be repaid during the year C. estimate when excess cash may be available so plans can be made to invest it D. all of the abovearrow_forwardFriendly Bank is attempting to determine the cost behavior of its small business lending operations. One of the major activities is the application activity. Two possible activity drivers have been mentioned: application hours (number of hours to complete the application) and number of applications. The bank controller has accumulated the following data for the setup activity: Required: 1. Estimate a regression equation with application hours as the activity driver and the only independent variable. If the bank forecasts 2,600 application hours for the next month, what will be the budgeted application cost? 2. Estimate a regression equation with number of applications as the activity driver and the only independent variable. If the bank forecasts 80 applications for the next month, what will be the budgeted application cost? 3. Which of the two regression equations do you think does a better job of predicting application costs? Explain. 4. Run a multiple regression to determine the cost equation using both activity drivers. What are the budgeted application costs for 2,600 application hours and 80 applications?arrow_forwardReview the completed master budget and answer the following questions: Is Ranger Industries expecting to earn a profit during the next quarter? If so, how much? Does the company need to borrow cash during the quarter? Can it make any repayments? Explain. (Carefully review rows 74 through 80.)arrow_forward
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- answer quick with explanationarrow_forward8. Which of the following expenses would not appear in cash budget? Depreciation expense Marketing expense Interest expense а. b. с. d. Wages expense Information technology has made it easier for Amazon.com's managers to perform all of the following tasks except 9. а. preparing performance reports that identify variances between actual and budgeted revenues and costs. combining individual units' budgets into the companywide budget. sensitivity analyses. removing budgetary slack from the budget. b. с. d. 10. A company prepares a five-year budget. This budget would be considered a(n) strategic budget operational budget master budget flexible budget а. b. с. d.arrow_forwardwhich one is correct please confirm? QUESTION 20 The first step in cash budget preparation is the ____________. a. estimation of the expected cash disbursements b. estimation of cash receipts c. scheduling of disbursements d. estimation of credit salesarrow_forward
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