Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Chapter 21, Problem 14P
Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl’s Doll Shop. Business has been good, but Koehl frequently runs out of cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank to have cash ready as needed, but first she needs a
Sales are made on a cash basis only. Koehl’s purchases must be paid for during the following month. Koehl pays herself a salary of $4,800 per month, and the rent is $2,000 per month. In addition, she must make a tax payment of $12,000 in December. The current cash on hand (on December 1) is $400, but Koehl has agreed to maintain an average bank balance of $6,000—this is her target cash balance. (Disregard the amount in the cash register, which is insignificant because Koehl keeps only a small amount on hand in order to lessen the chances of robbery.)
The estimated sales and purchases for December, January, and February are shown in the following table. Purchases during November amounted to $140,000.
- a. Prepare a cash budget for December, January, and February.
- b. Suppose that Koehl starts selling on a credit basis on December 1, giving customers 30 days to pay. All customers accept these terms, and all other facts in the problem are unchanged. What would the company’s loan requirements be at the end of December in this case? (Hint: The calculations required to answer this part are minimal.)
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Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl's Doll Shop. Business has been good, but Koehl frequently runs out of cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank
to have cash ready as needed, but first she needs a forecast of how much she should borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high.
Sales are made on a cash basis only. Koehl's purchases must be paid for during the following month. Koehl pays herself a salary of $4,500 per month, and the rent is $2,600 per month. In addition, she must make a tax payment of $10,000 in December. The current cash on hand (on December 1) is $400, but
Koehl has agreed to maintain an average bank balance of $4,500 - this is her target cash balance. (Disregard the amount in the cash register, which is…
Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl's Doll Shop. Business has been good, but Koehl frequently runs out of cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank to have cash ready as needed, but first she needs a forecast of how much she should borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high.
Sales are made on a cash basis only. Koehl's purchases must be paid for during the following month. Koehl pays herself a salary of $4,800 per month, and the rent is $2,200 per month. In addition, she must make a tax payment of $13,000 in December. The current cash on hand (on December 1) is $700, but Koehl has agreed to maintain an average bank balance of $5,000 - this is her target cash balance. (Disregard the amount in the cash register, which is…
Patricia Smith recently leased space in the Southside Mall and opened a new business, Smith's Coi Shop. Business has been good. but Smith frequently runs out of Cash. This has necessitated late payment on certain orders, which in turn is beginning to cause a problem with suppliers. Smith plans to borrow from the bank to have cash as needed. but first she needs a forecast of just how much she must borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high.
Sales are made on a cash basis only. Smith's purchases must be paid for during the month following the purchase. Smith pays herself a salary of $4,800 per month and the rent is $2,000 per month. In addition, she must make a tax payment of $12,000 in December. The current cash on hand (on December 1) is $400, but Smith has agreed to maintain an average bank balance of $6,000 this is her target cash balance. (Disregard till cash, which is insignificant…
Chapter 21 Solutions
Intermediate Financial Management (MindTap Course List)
Ch. 21 - a. Working capital; net working capital; net...Ch. 21 - Prob. 2QCh. 21 - Is it true that, when one firm sells to another on...Ch. 21 - What are the four elements of a firm’s credit...Ch. 21 - Prob. 5QCh. 21 - Prob. 6QCh. 21 - Prob. 7QCh. 21 - Is it true that most firms are able to obtain some...Ch. 21 - What kinds of firms use commercial paper?Ch. 21 - Prob. 1P
Ch. 21 - Medwig Corporation has a DSO of 17 days. The...Ch. 21 - What are the nominal and effective costs of trade...Ch. 21 - A large retailer obtains merchandise under the...Ch. 21 - A chain of appliance stores, APP Corporation,...Ch. 21 - Prob. 6PCh. 21 - Calculate the nominal annual cost of nonfree trade...Ch. 21 - If a firm buys on terms of 3/15, net 45, but...Ch. 21 - Grunewald Industries sells on terms of 2/10, net...Ch. 21 - The D.J. Masson Corporation needs to raise...Ch. 21 - Negus Enterprises has an inventory conversion...Ch. 21 - Strickler Technology is considering changes in its...Ch. 21 - Payne Products had $1.6 million in sales revenues...Ch. 21 - Dorothy Koehl recently leased space in the...Ch. 21 - Suppose a firm makes purchases of $3.65 million...Ch. 21 - The Thompson Corporation projects an increase in...Ch. 21 - The Raattama Corporation had sales of $3.5 million...Ch. 21 - Karen Johnson, CFO for Raucous Roasters (RR), a...Ch. 21 - Prob. 2MCCh. 21 - Prob. 3MCCh. 21 - Prob. 4MCCh. 21 - Prob. 5MCCh. 21 - Prob. 6MCCh. 21 - Prob. 7MCCh. 21 - Prob. 8MCCh. 21 - What is the impact of higher levels of accruals,...Ch. 21 - Prob. 10MCCh. 21 - Prob. 11MCCh. 21 - Prob. 12MCCh. 21 - Prob. 13MCCh. 21 - Prob. 14MCCh. 21 - Prob. 15MCCh. 21 - Prob. 16MC
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