Chief financing officer of Company RR, a speciality coffee manufacturer, is re-thinking about its working capital policy and wants to re-new its line of credit and it wouldn’t ready to build payroll, probably forcing the company out of business. The scare has forced the company to examine carefully about each component of working capital to make sure it is required, and decide whether the goal is to determine the line of credit are often eliminated entirely. Previously, it has done little to look at assets and mainly because of poor communication among business functions and the decisions about working capital cannot be made at vacuum. To discuss: Facts revealed by cash budget regarding the target cash level.

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Answer 1

Question

Chapter 21, Problem 16MC

p)

1)

Summary Introduction

Case summary:

Chief financing officer of Company RR, a speciality coffee manufacturer, is re-thinking about its working capital policy and wants to re-new its line of credit and it wouldn’t ready to build payroll, probably forcing the company out of business.

The scare has forced the company to examine carefully about each component of working capital to make sure it is required, and decide whether the goal is to determine the line of credit are often eliminated entirely.

Previously, it has done little to look at assets and mainly because of poor communication among business functions and the decisions about working capital cannot be made at vacuum.

To discuss: Facts revealed by cash budget regarding the target cash level.

2)

Summary Introduction

To discuss: Whether depreciation expenses be explicitly included in company’s cash budget or not.

3)

Summary Introduction

To discuss: Other potential cash inflows other than collections.

4)

Summary Introduction

To discuss: The way of incorporating interest earned or paid on loans or short term securities into cash budget.

5)

Summary Introduction

To discuss: Opinions of person J on bad debts and sales are realistic or not and the way bad debts deal with in a cash budgeting sense.

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5. In her preliminary cash budget, Johnson hasassumed that all sales are collected and thusthat RR has no bad debts. Is this realistic? Ifnot, how would bad debts be dealt with in acash budgeting sense? (Hint: Bad debts willaffect collections but not purchases.)

4. What are the pro forma financial statements? 5. What is the percentage of sales forecasting method? What are some of the limitations financial analysis should be aware of in applying this method? 6. What is a cash budget? What are the usual steps involved in preparing a cash budget?

Which of the following statements is NOT correct? a. The cash budget must be prepared prior to the sales budget because managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current period. b. The sales budget is constructed by multiplying the expected sales in units by the sales price. c. The sales budget is the starting point in preparing the master budget. d. The sales budget generally is accompanied by a computation of expected cash receipts for the forthcoming budget period.

Answer 2

Question

Chapter 21, Problem 16MC

p)

1)

Summary Introduction

Case summary:

Chief financing officer of Company RR, a speciality coffee manufacturer, is re-thinking about its working capital policy and wants to re-new its line of credit and it wouldn’t ready to build payroll, probably forcing the company out of business.

The scare has forced the company to examine carefully about each component of working capital to make sure it is required, and decide whether the goal is to determine the line of credit are often eliminated entirely.

Previously, it has done little to look at assets and mainly because of poor communication among business functions and the decisions about working capital cannot be made at vacuum.

To discuss: Facts revealed by cash budget regarding the target cash level.

2)

Summary Introduction

To discuss: Whether depreciation expenses be explicitly included in company’s cash budget or not.

3)

Summary Introduction

To discuss: Other potential cash inflows other than collections.

4)

Summary Introduction

To discuss: The way of incorporating interest earned or paid on loans or short term securities into cash budget.

5)

Summary Introduction

To discuss: Opinions of person J on bad debts and sales are realistic or not and the way bad debts deal with in a cash budgeting sense.

Expert Solution & Answer

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Answer 3

Question

Chapter 21, Problem 16MC

p)

1)

Summary Introduction

Case summary:

Chief financing officer of Company RR, a speciality coffee manufacturer, is re-thinking about its working capital policy and wants to re-new its line of credit and it wouldn’t ready to build payroll, probably forcing the company out of business.

The scare has forced the company to examine carefully about each component of working capital to make sure it is required, and decide whether the goal is to determine the line of credit are often eliminated entirely.

Previously, it has done little to look at assets and mainly because of poor communication among business functions and the decisions about working capital cannot be made at vacuum.

To discuss: Facts revealed by cash budget regarding the target cash level.

2)

Summary Introduction

To discuss: Whether depreciation expenses be explicitly included in company’s cash budget or not.

3)

Summary Introduction

To discuss: Other potential cash inflows other than collections.

4)

Summary Introduction

To discuss: The way of incorporating interest earned or paid on loans or short term securities into cash budget.

5)

Summary Introduction

To discuss: Opinions of person J on bad debts and sales are realistic or not and the way bad debts deal with in a cash budgeting sense.

Expert Solution & Answer

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Answer 4

Question

Chapter 21, Problem 16MC

p)

1)

Summary Introduction

Case summary:

Chief financing officer of Company RR, a speciality coffee manufacturer, is re-thinking about its working capital policy and wants to re-new its line of credit and it wouldn’t ready to build payroll, probably forcing the company out of business.

The scare has forced the company to examine carefully about each component of working capital to make sure it is required, and decide whether the goal is to determine the line of credit are often eliminated entirely.

Previously, it has done little to look at assets and mainly because of poor communication among business functions and the decisions about working capital cannot be made at vacuum.

To discuss: Facts revealed by cash budget regarding the target cash level.

2)

Summary Introduction

To discuss: Whether depreciation expenses be explicitly included in company’s cash budget or not.

3)

Summary Introduction

To discuss: Other potential cash inflows other than collections.

4)

Summary Introduction

To discuss: The way of incorporating interest earned or paid on loans or short term securities into cash budget.

5)

Summary Introduction

To discuss: Opinions of person J on bad debts and sales are realistic or not and the way bad debts deal with in a cash budgeting sense.

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Answer 5

Chapter 21, Problem 16MC

p)

1)

Summary Introduction

Case summary:

Chief financing officer of Company RR, a speciality coffee manufacturer, is re-thinking about its working capital policy and wants to re-new its line of credit and it wouldn’t ready to build payroll, probably forcing the company out of business.

The scare has forced the company to examine carefully about each component of working capital to make sure it is required, and decide whether the goal is to determine the line of credit are often eliminated entirely.

Previously, it has done little to look at assets and mainly because of poor communication among business functions and the decisions about working capital cannot be made at vacuum.

To discuss: Facts revealed by cash budget regarding the target cash level.

2)

Summary Introduction

To discuss: Whether depreciation expenses be explicitly included in company’s cash budget or not.

3)

Summary Introduction

To discuss: Other potential cash inflows other than collections.

4)

Summary Introduction

To discuss: The way of incorporating interest earned or paid on loans or short term securities into cash budget.

5)

Summary Introduction

To discuss: Opinions of person J on bad debts and sales are realistic or not and the way bad debts deal with in a cash budgeting sense.

Answer 6

Chapter 21, Problem 16MC

p)

1)

Summary Introduction

Case summary:

Chief financing officer of Company RR, a speciality coffee manufacturer, is re-thinking about its working capital policy and wants to re-new its line of credit and it wouldn’t ready to build payroll, probably forcing the company out of business.

The scare has forced the company to examine carefully about each component of working capital to make sure it is required, and decide whether the goal is to determine the line of credit are often eliminated entirely.

Previously, it has done little to look at assets and mainly because of poor communication among business functions and the decisions about working capital cannot be made at vacuum.

To discuss: Facts revealed by cash budget regarding the target cash level.

Answer 7

Chapter 21, Problem 16MC

p)

1)

Summary Introduction

Case summary:

Chief financing officer of Company RR, a speciality coffee manufacturer, is re-thinking about its working capital policy and wants to re-new its line of credit and it wouldn’t ready to build payroll, probably forcing the company out of business.

The scare has forced the company to examine carefully about each component of working capital to make sure it is required, and decide whether the goal is to determine the line of credit are often eliminated entirely.

Previously, it has done little to look at assets and mainly because of poor communication among business functions and the decisions about working capital cannot be made at vacuum.

To discuss: Facts revealed by cash budget regarding the target cash level.

Answer 8

2)

Summary Introduction

To discuss: Whether depreciation expenses be explicitly included in company’s cash budget or not.

Answer 9

2)

Summary Introduction

To discuss: Whether depreciation expenses be explicitly included in company’s cash budget or not.

Answer 10

3)

Summary Introduction

To discuss: Other potential cash inflows other than collections.

Answer 11

3)

Summary Introduction

To discuss: Other potential cash inflows other than collections.

Answer 12

4)

Summary Introduction

To discuss: The way of incorporating interest earned or paid on loans or short term securities into cash budget.

Answer 13

4)

Summary Introduction

To discuss: The way of incorporating interest earned or paid on loans or short term securities into cash budget.

Answer 14

5)

Summary Introduction

To discuss: Opinions of person J on bad debts and sales are realistic or not and the way bad debts deal with in a cash budgeting sense.

Answer 15

5)

Summary Introduction

To discuss: Opinions of person J on bad debts and sales are realistic or not and the way bad debts deal with in a cash budgeting sense.

Answer 16

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Answer 17

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Answer 18

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Answer 19

Ch. 21 - a. Working capital; net working capital; net...Ch. 21 - Prob. 2Q Ch. 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. 5Q Ch. 21 - Prob. 6Q Ch. 21 - Prob. 7Q Ch. 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

Solution Summary: The author explains how the chief financing officer of a coffee manufacturer re-thinks its working capital policy and decides whether the goal is to determine the line of credit are often eliminated.

Concept explainers

To discuss: Whether depreciation expenses be explicitly included in company’s cash budget or not.

To discuss: Other potential cash inflows other than collections.

To discuss: The way of incorporating interest earned or paid on loans or short term securities into cash budget.

To discuss: Opinions of person J on bad debts and sales are realistic or not and the way bad debts deal with in a cash budgeting sense.

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Chapter 21 Solutions