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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

CASH BUDGETING Rework problem 16-10 using a spreadsheet model. After completing parts a through d, respond to the following: If Bowers’ customers began to pay late, collections would slow down, thus increasing the required loan amount. If sales declined, this also would have an effect on the required loan. Do a sensitivity analysis that shows the effects of these two factors on the maximum loan requirement.

a.

Summary Introduction

To prepare: A monthly cash budget for the last 6 months of 2015.

Working capital:

Working capital speculation is the measure of cash, require to extend business, meet here and now business obligations and cover costs of doing business.

Cash budget:

A money spending plan is an estimation of the money inflows and outpourings for a business over a particular timeframe. This financial plan is utilized to evaluate whether the substance has adequate money to work.

Explanation

Using a excel spreadsheet the monthly cash budget for the last 6 months of 2015 is as follows:

Excel Spreadsheet:

b.

Summary Introduction

To prepare: The monthly estimated required financing or excess fund.

c.

Summary Introduction

To determine: The effect on the cash budget, if cash budget is prepared under the assumptions and steps which make the financial requirement valid under the assumptions.

d.

Summary Introduction

To determine: The changes in the current and debt ratio during the year with calculation and explain whether the changes in the ratios affect the ability of the firm to get bank credit.

Summary Introduction

To determine: The sensitivity analysis that shows the effect of the two factors on the maximum loan requirement.

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