Q7 a Please assist to answer Q7a 5. (a) The cash budget is indispensable to the financial manager in determining the short-term cashneeds of the firm and, accordingly, in planning its short-term financing. Is the cash budget a bettermeasure of liquidity than traditional measures, such as the current ratio and quick ratio? Explainyour reasoning.(b) Kiddy Company had credit sales of RM1,000,000, RM1,500,000 and RM800,000 in October,November and December 2021, respectively. The company's credit sales projections for Januarythrough March of 2022 are as follows:January – RM3,000,000February – RM2,400,000March – RM2,000,000Kiddy Company has normally collected 60% of its credit sales in the month following the sale, 30%in the second following month and 10% in the third month. Assuming this collection patterncontinues, prepare a schedule of cash receipts from receivables collection for the period Januarythrough March of 2022 (for the month of January, February and March).

A cash budget is a forecast of cash inflows and outflows for a given time period. Cash budgets are…

Answered: 5. (a) The cash budget is indispensable…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The financial manager of a firm wants to determine the amount of cash outlays to be spent for the next period. He asked the help of the accountant and the latter provided a cash budget for the next year. According to the computations, the company would be incurring cash expenses of P6,612,500 per month. The financial manager has estimated a cost of P40 per transaction in case non-cash asset is converted to cash. The firm’s opportunity cost ratio is 12%. The optimum cash balance is? The average cash balance is? the number of conversion made during the year is? The total cash cost is?
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The management of the Book Warehouse Company wishes to apply the Miller-Orr model to manage its cash investment. They have determined that the cost of either investing in or selling marketable securities is $100. By looking at Book Warehouse’s past cash needs, they have determined that the variance of daily cash flows is $20,000. Book Warehouse’s opportunity cost of cash, per day, is estimated to be 0.03%. Based on experience, management has determined that the cash balance should never fall below $10,000. Calculate the lower limit, the return point, and the upper limit based on the Miller-Orr model of cash management.
The financial manager of Sarap Corporation wants to determine the amount of cash outlays to be spent for the nextperiod. He asked the help of the accountant and the latter provided a cash budget for the next year. According tothe computations, the company would be incurring cash expenses of P6,612,500 per month. The financial managerhas estimated a cost of P40 per transaction in case non-cash asset is converted to cash. The firm’s opportunity costratio is 12%.a. The optimum cash balance is?b. The average cash balance is?c. the number of conversion made during the year is?d. The total cash cost is?

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