Preparing a financial budget—cash budget, sensitivity analysis Leichter Auto Parts, a family-owned auto parts store, began January with $10,500 cash. Management forecasts that collections from credit customers will be $11,000 in January and $15,200 in February. The store is scheduled to receive $8,500 cash on a business note receivable in January. Projected cash payments include inventory purchases ($15,600 in January and $14,800 in February) and selling and administrative expenses ($2,900 each month) Leichter Auto Parts’s bank requires a $10,000 minimum balance in the store’s checking account At the end of am month when the account balance falls below $10,000 the bank automatically extends credit to the store in multiples of $1,000. Leichter Auto Parts borrows as little as possible and pays back loans in quarterly installments of $2,000 plus 4% APR interest on the entire unpaid principal. The first payment occurs three months after the loan. Requirements Prepare Leichter Auto Parts’s cash budget for January and February. How much cash will Leichter Auto Parts borrow in February if collections from customers that month total $14,200 instead of $15,200?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Preparing a financial budget—
Leichter Auto Parts, a family-owned auto parts store, began January with $10,500 cash. Management
Leichter Auto Parts’s bank requires a $10,000 minimum balance in the store’s checking account At the end of am month when the account balance falls below $10,000 the bank automatically extends credit to the store in multiples of $1,000. Leichter Auto Parts borrows as little as possible and pays back loans in quarterly installments of $2,000 plus 4% APR interest on the entire unpaid principal. The first payment occurs three months after the loan.
Requirements
- Prepare Leichter Auto Parts’s cash budget for January and February.
- How much cash will Leichter Auto Parts borrow in February if collections from customers that month total $14,200 instead of $15,200?
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