Given the following information, construct the firm's cash budget for the given months. a. 75 percent of sales are for credit, and collections occur after thirty days. b. A $100,000 Treasury bill matures in March. c. Monthly fixed disbursements are $14,000. d. Variable disbursements are 62 percent of sales and occur one month prior to sales. e. A tax payment of $13,500 is due in February. f. The initial cash is $20,000. g. The minimum required cash balance is $5,000. h. Variable cash disbursements are given for April. January February March April Sales -- $60,000 80,000 100,000 Cash sales -- Collections -- Other receipts --
Total cash receipts -- Variable 30,000 disbursements Fixed disbursements Other disbursements Total cash disbursements Net change during the month Beginning cash Ending cash Required cash Excess cash to invest Cash borrowed
What will be an ideal response?
January February March AprilSales -- $60,000 80,000 100,000Cash sales -- 15,000 20,000 25,000Collections -- -- 45,000 60,000Other receipts -- -- 100,000 --Total cash receipts -- 15,000 165,000 85,000Variable 37,200 49,600 62,000 30,000disbursementsFixed 13,000 13,000 13,000 13,000disbursementsOther disbursements -- 15,000 -- --Total cash 50,200 77,600 75,000 43,000disbursementsNet change during the month (50,200) (62,600) 90,000 42,000Beginning cash 20,000 (30,200) (92,800) (2,800)Ending cash (30,200) (92,800) (2,800) 39,200Required cash (5,000) (5,000) (5,000) (5,000)Excess cash to -- -- -- 34,200investFunds borrowed 35,200 97,800 7,800 --The requirement to cover expenses before sales and the collection of accounts receivable means the firm initially has a cash outflow, which requires temporary borrowing. The redemption of the Treasury bill and the collection of the accounts receivable are used to retire the short-term loans, so the firm has excess cash to invest short-term at the end of the budget period.
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Indicate whether the statement is true or false
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