Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
14th Edition
ISBN: 9780133507690
Author: Lawrence J. Gitman, Chad J. Zutter
Publisher: PEARSON
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Chapter 4, Problem 4.14P
Learning Goal 4
P4-15 Multiple cash budgets: Scenario analysis Brownstein Inc expects sales of $100,000 during each of the next 3 months. It will make monthly purchases of 560,000 during this time. Wages and salaries are $10,000 per month plus 5% of sales. Brownstein expects to make a tax payment of $20,000 in the next month and a $15,000 purchase of fixed assets in the second month and to receive $8,000 in cash from the sale of an asset in the third month. All sales and purchases are for cash. Beginning cash and the minimum cash balance are assumed to be zero.
- a. Construct a cash budget for the next 3 months.
- b. Brownstein is unsure of the sales levels, but all other figures are certain. If the most pessimistic sales figure is $80,000 per month and the most optimistic is $120,000 per month, what are the monthly minimum and maximum ending cash balances that the firm can expect for each of the 1-month periods?
- c. Briefly discuss how the
financial manager can use the data in parts a and b to plan for financing needs.
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Case study #3
Hussain Traders LLC is providing the following information. You are required to prepare Cash Budget for
the period of 6 months from July to December 2020. All amounts in Rials.
Month
July
August
Sales
Rent
120,000
6,000
4,000
140,000 7,000
5,000
September 110,000 6,000
7,000
October
130,000 4,000
3,000
November 120,000 6,000
4,000
December 150,000 8,000 5,000
Marketing
Expenses
Additional information:
Salaries
8,000
4,000
5,000
4,000
6,000
7,000
a) Cash sales 50% and the balance in the following month
b) Commission received RO 20,000 in the month of November.
c) Sale of Fixed Assets in the month of December for RO 5,000
d)
Purchase of Printing Machine in September RO 50,000
e) Interest payment to bank RO 40,000 in the month of October
f) All other expenses are paid on the 1st of next month.
g)
Opening Balance for the month of July is RO 50000.
Administrative
Expenses
1,000
2,000
4,000
3,000
7,000
5,000
Multiple cash budgets-Scenario analysis Brownstein, Inc., expects sales of $96,000 during each of the next 3 months. It will make monthly purchases of $58,000
during this time. Wages and salaries are $12,000 per month plus 6% of sales. Brownstein expects to make a tax payment of $17,000 in the next month and a $20,000
purchase of fixed assets in the second month and to receive $8,000 in cash from the sale of an asset in the third month. All sales and purchases are for cash. Beginning
cash and the minimum cash balance are assumed to be zero.
a. Construct a cash budget for the next 3 months.
b. Brownstein is unsure of the sales levels, but all other figures are certain. If the most pessimistic sales figure is $77,000 per month and the most optimistic is $124,000
per month, what are the monthly minimum and maximum ending cash balances that the firm can expect for each of the 1-month periods?
c. Briefly discuss how the financial manager can use the data in parts a. and b. to plan for…
Chapter 4 Solutions
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Ch. 4.1 - Briefly describe the first four modified...Ch. 4.1 - Describe the overall cash flow through the firm in...Ch. 4.1 - Prob. 4.3RQCh. 4.1 - 4-B Why is depreciation (as well as amortization...Ch. 4.1 - Prob. 4.5RQCh. 4.1 - Prob. 4.6RQCh. 4.1 - Prob. 4.7RQCh. 4.2 - Prob. 4.8RQCh. 4.2 - Prob. 4.9RQCh. 4.3 - Prob. 4.10RQ
Ch. 4.3 - Prob. 4.11RQCh. 4.3 - Prob. 4.12RQCh. 4.3 - What is the cause of uncertainty in the cash...Ch. 4.4 - Prob. 4.14RQCh. 4.5 - Prob. 4.15RQCh. 4.5 - Prob. 4.16RQCh. 4.6 - Prob. 4.17RQCh. 4.6 - What is the significance of the plug figure,...Ch. 4.7 - Prob. 4.19RQCh. 4.7 - Prob. 4.20RQCh. 4 - Opener-in-Review The chapter opener described a...Ch. 4 - Learning Goals 2, 3 ST4-1 Depreciation and cash...Ch. 4 - Prob. 4.2STPCh. 4 - Prob. 4.3STPCh. 4 - Prob. 4.1WUECh. 4 - Prob. 4.2WUECh. 4 - Learning Goal 3 E4-3 Determine the operating cash...Ch. 4 - Prob. 4.4WUECh. 4 - Prob. 4.5WUECh. 4 - Prob. 4.1PCh. 4 - Prob. 4.2PCh. 4 - Prob. 4.3PCh. 4 - Learning Goals 2, 3 P4-4 Depreciation and...Ch. 4 - Learning Goal 3 P4-5 Classifying inflows and...Ch. 4 - Prob. 4.6PCh. 4 - Learning Goal 4 P4-8 Cash receipts A firm has...Ch. 4 - Learning Goal 4 P4-9 Cash disbursements schedule...Ch. 4 - Learning Goal 4 P4-10 Cash budget: Basic Grenoble...Ch. 4 - Prob. 4.10PCh. 4 - Prob. 4.11PCh. 4 - Prob. 4.12PCh. 4 - Prob. 4.13PCh. 4 - Learning Goal 4 P4-15 Multiple cash budgets:...Ch. 4 - Prob. 4.15PCh. 4 - Prob. 4.16PCh. 4 - Prob. 4.17PCh. 4 - Prob. 4.18PCh. 4 - Prob. 4.19PCh. 4 - Prob. 4.20PCh. 4 - Prob. 4.21PCh. 4 - Prob. 1SE
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