Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 18, Problem 1M
Summary Introduction
Case summary:
Company P manufacturing is the manufacturer of cardboard boxes. The company decided to put all its receivables in one shoebox and all payables in others.
Due this disorganized system, the company employed Person X. The company has a cash balance of $240,000 and planning to purchase a new box folding in the fourth quarter at a cost of $445,000. The purchase of machinery is in cash mode because of offered discounts. It needs to maintain minimum cash balance of $125,000.
Characters in the case:
- Company P: The manufacturer
- Person X: The new employee
To determine: The cash budget of P manufacturers
Introduction:
Cash budget is the numerical expression of cash inflows and outflows of the company during a specific period.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
You are an accounting student at Berkeley College and will not graduate for another year. But because of your excellent grades so far, you have been able to land a job in the purchasing department of a retailer. One of the purchasing agents in your company is negotiating for the receipt of a very large order of uninsured goods from a supplier. The purchasing agent is able to get a better deal on the goods if they are shipped FOB shipping point rather than FOB destination. The agent doesn’t know the difference between these two concepts. He also doesn’t understand why choosing one over the other should make any difference to the company. As a student of accounting at Berkeley College, you know well the difference between these 2 concepts and you know why one would be a better choice over the other in the case of uninsured goods. Please explain these two concepts in this discussion and tell the purchasing agent which shipping method is preferable and why.
You are working as a summer intern at a rapidly growing orgainc food distribution. Part of your responsibility is to assist in the accounts payable department. You notice that most of the bills are not paid with in discount period. The manager of the accounts payable sees the bills are organized by vendor, like the accounts payable ledger, and she is too busy to keep track of the discounts period. Besides, the owner has told her that The 1% and 2% discount available or not worth worrying about. 1. Explain to the owner why it is expensive not to take it advantage to cash discounts on credit purchases.
suggest a way to file (organize) suppliers invoices so that they are paid with in the discount period.
Mrs. Paul the owner of several supermarkets across the country is concerned about the errors being made by the cashiers while carrying out their daily duties. Customers are constantly complaining about being overcharged for items and this has significantly affected customer service. Mrs. Paul is very worried and has sought your help on this matter. Her inventory and the cashiering system only carry prices that are stuck to each item, which then needs to be manually entered to calculate the final price.
what is the underlying problem as it relates to the errors being made and recommend a solution, incorporating technology, to avoid a reoccurrence of this going forward?
Chapter 18 Solutions
Fundamentals of Corporate Finance
Ch. 18.1 - What is the difference between net working capital...Ch. 18.1 - Prob. 18.1BCQCh. 18.1 - List five potential sources of cash.Ch. 18.1 - Prob. 18.1DCQCh. 18.2 - Prob. 18.2ACQCh. 18.2 - Prob. 18.2BCQCh. 18.2 - Prob. 18.2CCQCh. 18.3 - What keeps the real world from being an ideal one...Ch. 18.3 - What considerations determine the optimal size of...Ch. 18.3 - Prob. 18.3CCQ
Ch. 18.4 - Prob. 18.4ACQCh. 18.4 - Prob. 18.4BCQCh. 18.5 - Prob. 18.5ACQCh. 18.5 - Describe two types of secured loans.Ch. 18.6 - Prob. 18.6ACQCh. 18.6 - In Table 18.6, what would happen to Fun Toys...Ch. 18 - Prob. 18.1CTFCh. 18 - A firm has an operating cycle of 64 days and a...Ch. 18 - Prob. 18.4CTFCh. 18 - Prob. 18.5CTFCh. 18 - Operating Cycle [LO1] What are some of the...Ch. 18 - Prob. 2CRCTCh. 18 - Prob. 3CRCTCh. 18 - Cost of Current Assets [LO2] Loftis Manufacturing,...Ch. 18 - Operating and Cash Cycles [LO1] Is it possible for...Ch. 18 - Use the following information to answer Questions...Ch. 18 - Use the following information to answer Questions...Ch. 18 - Prob. 8CRCTCh. 18 - Use the following information to answer Questions...Ch. 18 - Use the following information to answer Questions...Ch. 18 - Changes in the Cash Account [LO4] Indicate the...Ch. 18 - Prob. 2QPCh. 18 - Changes in the Operating Cycle [LO1] Indicate the...Ch. 18 - Prob. 4QPCh. 18 - Calculating Cash Collections [LO3] The Morning...Ch. 18 - Prob. 6QPCh. 18 - Prob. 7QPCh. 18 - Calculating Payments [LO3] Sedman, Corp., has...Ch. 18 - Calculating Payments [LO3] The Torrey Pine...Ch. 18 - Calculating Cash Collections [LO3] The following...Ch. 18 - Calculating the Cash Budget [LO3] Here are some...Ch. 18 - Prob. 12QPCh. 18 - Prob. 13QPCh. 18 - Prob. 14QPCh. 18 - Calculating the Cash Budget [LO3] Wildcat, Inc.,...Ch. 18 - Prob. 16QPCh. 18 - Costs of Borrowing [LO3] In exchange for a 400...Ch. 18 - Prob. 18QPCh. 18 - Prob. 1MCh. 18 - Prob. 2MCh. 18 - Prob. 3M
Knowledge Booster
Similar questions
- A large retailer is going to run an experiment at one of its stores to see how cost effective it will be to imbed merchandise with small radio frequency identification (RFID) chips. Shoppers will select items from the store and walk out without stopping to pay at a checkout lane. The RFID chips will record what items are taken and will automatically deduct their price from shoppers’ bank accounts. The retailer expects to save the cost of staffing 12 checkout lanes, which amounts to $100,000 per year. How much can the retailer afford to spend on its RFID investment if the system has a life of 10 years and no residual value? The retailer’s interest rate is 15% per year.arrow_forwardJames Burrow is the loan officer for the National Bank of Dallas.National has a loan of $325,000 outstanding to Regional Delivery Service, a companyspecializing in delivering products of all types on behalf of smaller companies. National’scollateral on the loan consists of 25 small delivery trucks with an average original cost of$24,000.Burrow is concerned about the collectibility of the outstanding loan and whether thetrucks still exist. He therefore engages Samantha Altman, CPA, to count the trucks, usingregistration information held by Burrow. She was engaged because she spends most ofher time auditing used automobile and truck dealerships and has extensive specializedknowledge about used trucks. Burrow requests that Altman issue a report stating thefollowing:1. Which of the 25 trucks is parked in Regional’s parking lot on the night of June 30,2013.2. Whether all of the trucks are owned by Regional Delivery Service.3. The condition of each truck, using the guidelines of poor, good,…arrow_forwardAdel & Co is a company manufacturing various types of mini bar refrigerators for hotels. The company does not have an internal control department. Below is the company’s sale and receivables system:i. Sales staff will carry out credit references checks for all new customers. ii. These references will be submitted to the finance department, where the finance manager will approve on accepting a new customer if the customer has a good credit rating. iii. Once this is completed, an appropriate credit limit is set for each customer by the financial controller.iv. Customers must use a standard sales order form when placing orders.v. Sales clerks will enter details of the sales order into the system which then check if the goods ordered are available and if the customer has sufficient credit limit available for this order. vi. All forms are pre numbered sequentially.vii. Prices for all products are stored in the system’s master file. viii. These details can only be amended by the…arrow_forward
- Able, an accounts payable supervisor for ABC Company, bought supplies for a company he owned on the side. Able entered vouchers in ABC Company’s accounts payable system for the cost of the supplies. Checks were cut to pay for these unauthorized expenses during normal daily check runs. The goods ordered were drop-shipped to a location where Able could collect them. This is an example of: a. An expense reimbursement scheme b. A commission scheme c. A billing scheme d. An invoice kickback schemearrow_forwardYou are the auditor for Office Supply, which is opening a new location next week. The store manager has established all the controls you recommended for ensuring that sales are recorded properly, and cash is accounted for. The manager has heard from other locations that employees often used returned goods as a means of skimming money from the register. Choose one of the following questions to discuss: How might an employee use returned goods to skim money from the register? What controls would you recommend to prevent or detect fraudulent returns? What audit procedures might you perform to detect fraudulent returns?arrow_forwardYou are a financial adviser with a client in the wholesale produce business that just completed its first year of operations. Due to weather conditions, the cost of acquiring produce to resell has escalated during the latter part of this period. Your client, Javonte Gish, mentions that because her business sells perishable goods, she has striven to maintain a FIFO flow of goods. Although sales are good, the increasing cost of inventory has put the business in a tight cash position. Gish has expressed concern regarding the ability of the business to meet income tax obligations. Required Prepare a memorandum that identifies, explains, and justifies the inventory method you recommend that Ms. Gish adopt.arrow_forward
- ACME Corporation is a software development company that develops software for their clients. Their most popular product of them all is an accounting software suite. It is targeted for small and medium enterprises, and available to be bought in different online software stores. Apart from the basic cashflow management features, it also has various plugins to integrate different business operations such as inventory, purchases and invoicing. A perpetual license costs a company around HK$100,000 without the need to pay periodically for maintenance. a) A sales representative had been approaching Company X proactively, asking them to buy a copy of their product. A manager in Company X thought the product itself is suitable, but rejected the offer, quoting the high price and their investment of buying the software is too risky for the company to bear. If you were an executive in ACME and wanted to address concerns expressed by Company X. What do you think would be a suitable alternative…arrow_forwardStuart Airlines is a small airline that occasionally carries overload shipments for the overnight delivery company Never-Fail, Inc. Never-Fail is a multimillion-dollar company started by Wes Never immediately after he failed to finish his first accounting course. The company's motto is "We Never-Fail to Deliver Your Package on Time." When Never-Fail has more freight than it can deliver, it pays Stuart to carry the excess. Stuart contracts with independent pilots to fly its planes on a per-trip basis. Stuart recently purchased an airplane that cost the company $6,192,000. The plane has an estimated useful life of 25,800,000 miles and a zero salvage value. During the first week in January, Stuart flew two trips. The first trip was a round trip flight from Chicago to San Francisco, for which Stuart paid $350 for the pilot and $300 for fuel. The second flight was a round trip from Chicago to New York. For this trip, it paid $300 for the pilot and $150 for fuel. The round trip between…arrow_forwardWholemark is an Internet order business that sells one popular New Year's greeting card once a year. The cost of the paper on which the card is printed is $0.05 per card, and the cost of printing is $0.15 per card. The company receives $2.15 per card sold. Since the cards have the current year printed on them, unsold cards have no salvage value. Its customers are from the four areas: Los Angeles, Santa Monica, Hollywood, and Pasadena. Based on past data, the number of customers from each of the four regions is normally distributed with a mean of 2,000 and a standard deviation 500. (Assume these four are independent.) What optimal production quantity for the card? isarrow_forward
- Jason & Co is a company manufacturing various types of mini bar refrigerators for hotels. The company does not have an internal control department. Below is the company’s sale and receivables system:i. Sales staff will carry out credit references checks for all new customers. ii. These references will be submitted to the finance department, where the finance manager will approve on accepting a new customer if the customer has a good credit rating. iii. Once this is completed, an appropriate credit limit is set for each customer by the financial controller.iv. Customers must use a standard sales order form when placing orders.v. Sales clerks will enter details of the sales order into the system which then check if the goods ordered are available and if the customer has sufficient credit limit available for this order. vi. All forms are pre numbered sequentially.vii. Prices for all products are stored in the system’s master file. viii. These details can only be amended by the…arrow_forwardFranklin Airlines is a small airline that occasionally carries overload shipments for the overnight delivery company Never-Fail, Inc. Never-Fail is a multimillion-dollar company started by Wes Never immediately after he failed to finish his first accounting course. The company's motto is "We Never-Fail to Deliver Your Package on Time." When Never-Fail has more freight than it can deliver, it pays Franklin to carry the excess. Franklin contracts with independent pilots to fly its planes on a per-trip basis. Franklin recently purchased an airplane that cost the company $6,318,000. The plane has an estimated useful life of 24,300,000 miles and a zero salvage value. During the first week in January, Franklin flew two trips. The first trip was a round trip flight from Chicago to San Francisco, for which Franklin paid $340 for the pilot and $290 for fuel. The second flight was a round trip from Chicago to New York. For this trip, it paid $290 for the pilot and $145 for fuel. The round trip…arrow_forwardWhat is wrong in the following scenario?Jack O.A. Trade is an accountant is a small enterprise. Aside from keeping the books and preparing the financial statements, he is also in charge of removing and counting the cash from the cash register at the end of each day; comparing the cash with the duplicate sales slips used for recording cash sales; and depositing the cash with the enterprise' depository bank the next banking day. His duties also include releasing checks to the suppliers which he could sign in the absence of the owner and preparing the bank reconciliation statement at the end of each month.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning