Hi calcal!
Here's the completed table. The logic used to complete it was the following.
I'm assuming that both labor & admin expenses, and taxes, interest &
dividend expenses are paid in the same month they happen.
Collections on current sales is half the sales this month (because the
other half will be colected next month)
Collections on acct receivable is half the sales last month.
Payments of accts payable is the same as last month's credit
purchases, which we're paying today.
Cash purchases are cash purchases this month, since they were paid immediately.
Also, I think there's a line missng from the Cash Budget. There's a
capital expenditure of 100 in Feb, but there's no space to complete
this in the Cash Budget, so I would add a "Cash expenditures" line in
the "Uses of Cash" table.
Net Cash Inflow is Sources of Cash minus Uses of Cash.
Finally, cash at the start of period is simply cash at end of period of last month.
So here's the completed table.
Feb Mar Apr
Sources of cash
Collections on current sales 100 110 90
Collections on acct recvbl 90 100 110
Total sources of cash 190 210 200
Uses of cash
Payment of acct pyble 30 40 30
Cash purchases 70 80 60
Labor & admin expenses 30 30 30
Taxes, interest & dividends 10 10 10
Capital Expenditures 100 0 0
Total uses of cashe 240 160 130
Net cash inflow
Cash at start of period 100 50 100
+ Net cash inflow (50) 50 70
= Cash at end of period 50 100 170
+ Minimum operating cash balance 100 100 100
= Cumulative short-term financing req. 150 200 270
I hope this helps! If you have any questions regarding my answer,
please don't hesitate to request a clarification. Otherwise I await
your rating and final comments.
Best wishes!
elmarto |
Request for Answer Clarification by
calcal15-ga
on
24 Mar 2005 10:37 PST
these are the correct answers:
Week 3 Problem Solutions
7. a. Two-thirds of customers will pay by 15 days. The other 1/3 will
pay by 30 days. Therefore, the average days in receivables will be
2/3 ? 15 + 1/3 ? 30 = 20 days
b. Investment in A/R = days in receivables ? daily sales
= 20 ? $20 million365 = $1.096 million
c. With greater incentive to pay early, more customers will pay at 15
days instead of 30. Therefore, one would expect average days in
receivables to fall.
12. a. Order Size
100 200 250 500
Orders per month 10 5 4 2
Total order cost 300 150 120.0 60
Average inventory 50 100 125.0 250
Total carrying costs 75 150 187.5 375
Total inventory cost 375 300 307.5 435
b. EOQ = 2 ? purchases ? order costcarrying cost = 2 ? 1000 ? 301.50 = 200
The order size of 200 does in fact minimize total costs.
16. a. Net fixed assets grow by $200, which is 25% of the current
value of $800. Therefore, in order for the ratio of revenues to total
assets to remain constant, revenues also must grow by 25%.
Pro-forma Income Statement, 2001 Comment
Revenue $2250 25% higher
Fixed costs 56 unchanged
Variable costs 1800 80% of revenue
Depreciation 80 10% of 2000 fixed assets
Interest 24 .08 ? 2000 debt
Taxable Income 290
Taxes 116 40% of taxable income
Net Income $ 174 Difference
Dividends $ 116 Payout ratio = 2/3
Retained Earnings $ 58
Balance Sheet, year-end 2001
Assets
Net working capital $ 500 50% of fixed assets
Fixed assets 1000 Increases by 200
Total $1500
Liabilities & Equity
Debt $ 375 25% of total capital
Equity 1125
Total $1500
Notice that required external financing is:
Increase in assets ? retained earnings = $300 ? $58 = $242
$75 in new debt will be issued.
$167 in new equity needs to be issued.
Equity increases by $58 + $167 = $225.
b. If debt is the balancing item, all external financing will be new
debt issues. Therefore, the right-hand side of the balance sheet will
now be
Debt $ 542 increases by $242
Equity 958 increases by retained earnings
$1500
The debt ratio increases from .25 to 5421500 = .361.
23. February March April
Sources of cash
Collections on current sales $100 $110 $ 90
Collections on accounts receivable 90 100 110
Total sources of cash $190 $210 $200
Uses of cash
Payments of accounts payable $ 30 $ 40 $ 30
Cash purchases 70 80 60
Labor and administrative expenses 30 30 30
Capital expenditures 100 0 0
Taxes, interest, and dividends 10 10 10
Total uses of cash $240 $160 $130
Net cash inflow (sources ? uses) -$50 +$50 +$70
Cash at start of period $100 $ 50 $100
+ Net cash inflow - 50 + 50 + 70
= Cash at end of period $ 50 $100 $170
Minimum operating cash balance $100 $100 $100
Cumulative short-term financing
required (minimum cash balance $ 50 $ 0 -$70
minus cash at end of period)
|
Clarification of Answer by
elmarto-ga
on
25 Mar 2005 07:48 PST
Hi calcal15,
What's exactly the clarification you need?
Best regards,
elmarto
|
Request for Answer Clarification by
calcal15-ga
on
29 Mar 2005 15:37 PST
I sent you the correct answers to the questions. If you look I sent
you the correct answers. I would like the list price of $10.00 to be
$5.00 because only was was correct.
|
Clarification of Answer by
elmarto-ga
on
29 Mar 2005 17:00 PST
Hi calcal15,
Do you mean that my answers were wrong? I've just checked them against
the correct answers you posted, and they are almost identical. The
only difference is in the "Cumulative short-term financing req" row.
Since you put in the table that
Cash at end of period + Min. Op. Cash Balance (100) = Cumulative short term fin..
I summed 100 to the "Cash at end of period" values. I understood here
that the firm needs an extra 100 each month for possible extraordinary
expenditures, which is coherent with the "plus" sign at "Min. Op. Cash
Balance". Given the data you provided, I think I made a very
reasonable assumption there.
The rest of this question, and the other questions I've answered for
you, are correct as per the answers you supply.
Regarding the change of list price, I'm sorry to tell you that it's
not possible to do it once the question has been already answered.
Best regards,
elmarto
|
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