EBK PRINCIPLES OF MANAGERIAL FINANCE
14th Edition
ISBN: 9780100666757
Author: ZUTTER
Publisher: YUZU
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Chapter 4, Problem 4.7P
Learning Goal 4
P4-8 Cash receipts A firm has actual sales of $65,000 in April and $60,000 in May. It expects sales of $70,000 in June and $100,000 in July and in August. Assuming that sales are the only source of
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(Learning Objective 5: Use the COGS model to make management decisions)Spicer Industries prepares budgets to help manage the company. Spicer is budgeting forthe fiscal year ended January 31, 2018. During the preceding year ended January 31, 2017,sales totaled $9,700 million and cost of goods sold was $6,400 million. At January 31, 2017,inventory was $1,500 million. During the upcoming 2018 year, suppose Spicer expects costof goods sold to increase by 12%. The company budgets next year’s ending inventory at$1,800 million.Requirement1. One of the most important decisions a manager makes is how much inventory to buy. Howmuch inventory should Spicer purchase during the upcoming year to reach its budget?
Exercise 2 (Short-Term Finance and Planning)
You are hired as a financial manager and your first task is to establish the cash budget of your firm.
You gathered the following information.
The firm receives all income from sales
Sales estimates (in millions)
Q1 = 1,000; Q2 = 1,250; Q3 = 1,500; Q4 = 2,000; Q1 next year = 1,200
Accounts receivable
Beginning receivables = $3000
Average collection period = 45 days
Accounts payable
Purchases = 60% of next quarter’s sales
Beginning payables = 1,200
Accounts payable period is 45 days
Other expenses
Wages, taxes, and other expense are 25% of sales
Interest and dividend payments are $100
A major capital expenditure of $500 is expected in the second quarter
The initial cash balance is $100 and the company maintains a minimum balance of $50
A 13-44 Analyzing statements of cash flows (Learning Objectives 1, 2, & 3) Sears Holding Corporation (SHLD) announced in April 2016 that it would be closing 68 Kmart and 10 Sears stores during the second half of 2016. The stores it is closing have not been profitable for Sears, and it is looking to improve profitability with the closures. Similarly, Wal-Mart Stores, Inc. (WMT) announced in January 2016 that it would be closing 269 stores worldwide. Again, this move is an effort to increase profitability for Wal-Mart. Sears' fiscal year-end is the Saturday closest to January 31. Following are its statements of cash flows for the most recent three years.
Sears Holding Corporation Statements of Cash Flows (in millions)
Year Ended
Jan.30,2016
Jan.31,2015
Feb. 1,2014
Operating activities:
Net income (loss)
$(1,128)
$(1,810)
$(1,116)
Adjustments to convert to cash basis
(1,039)
423
7
Net cash used by operations
(2,167)…
Chapter 4 Solutions
EBK PRINCIPLES OF MANAGERIAL FINANCE
Ch. 4.1 - Briefly describe the first four modified...Ch. 4.1 - Describe the overall cash flow through the firm in...Ch. 4.1 - Prob. 4.3RQCh. 4.1 - 4-B Why is depreciation (as well as amortization...Ch. 4.1 - Prob. 4.5RQCh. 4.1 - Prob. 4.6RQCh. 4.1 - Prob. 4.7RQCh. 4.2 - Prob. 4.8RQCh. 4.2 - Prob. 4.9RQCh. 4.3 - Prob. 4.10RQ
Ch. 4.3 - Prob. 4.11RQCh. 4.3 - Prob. 4.12RQCh. 4.3 - What is the cause of uncertainty in the cash...Ch. 4.4 - Prob. 4.14RQCh. 4.5 - Prob. 4.15RQCh. 4.5 - Prob. 4.16RQCh. 4.6 - Prob. 4.17RQCh. 4.6 - What is the significance of the plug figure,...Ch. 4.7 - Prob. 4.19RQCh. 4.7 - Prob. 4.20RQCh. 4 - Opener-in-Review The chapter opener described a...Ch. 4 - Learning Goals 2, 3 ST4-1 Depreciation and cash...Ch. 4 - Prob. 4.2STPCh. 4 - Prob. 4.3STPCh. 4 - Prob. 4.1WUECh. 4 - Prob. 4.2WUECh. 4 - Learning Goal 3 E4-3 Determine the operating cash...Ch. 4 - Prob. 4.4WUECh. 4 - Prob. 4.5WUECh. 4 - Prob. 4.1PCh. 4 - Prob. 4.2PCh. 4 - Prob. 4.3PCh. 4 - Learning Goals 2, 3 P4-4 Depreciation and...Ch. 4 - Learning Goal 3 P4-5 Classifying inflows and...Ch. 4 - Prob. 4.6PCh. 4 - Learning Goal 4 P4-8 Cash receipts A firm has...Ch. 4 - Learning Goal 4 P4-9 Cash disbursements schedule...Ch. 4 - Learning Goal 4 P4-10 Cash budget: Basic Grenoble...Ch. 4 - Prob. 4.10PCh. 4 - Prob. 4.11PCh. 4 - Prob. 4.12PCh. 4 - Prob. 4.13PCh. 4 - Learning Goal 4 P4-15 Multiple cash budgets:...Ch. 4 - Prob. 4.15PCh. 4 - Prob. 4.16PCh. 4 - Prob. 4.17PCh. 4 - Prob. 4.18PCh. 4 - Prob. 4.19PCh. 4 - Prob. 4.20PCh. 4 - Prob. 4.21PCh. 4 - Prob. 1SE
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- A 13-44 Analyzing statements of cash flows (Learning Objectives 1, 2, & 3) Sears Holding Corporation (SHLD) announced in April 2016 that it would be closing 68 Kmart and 10 Sears stores during the second half of 2016. The stores it is closing have not been profitable for Sears, and it is looking to improve profitability with the closures. Similarly, Wal-Mart Stores, Inc. (WMT) announced in January 2016 that it would be closing 269 stores worldwide. Again, this move is an effort to increase profitability for Wal-Mart. Sears' fiscal year-end is the Saturday closest to January 31. Following are its statements of cash flows for the most recent three years. Sears Holding Corporation Statements of Cash Flows (in millions) Year Ended Jan.30,2016 Jan.31,2015 Feb. 1,2014 Operating activities: Net income (loss) $(1,128) $(1,810) $(1,116) Adjustments to convert to cash basis (1,039) 423 7 Net cash used by operations (2,167)…arrow_forwardQuestion # 2 Sohrab Bicycle Co. shows the following accounting information for next four quarters of year 2016: Sohrab Bicycle Co. shows the following accounting information for next four quarters of year 2016: Quarter-1 Quarter-2 Quarter-3 Quarter-4 Sales in units 400 500 600 700 Price will remain unchanged for the whole year (i.e. Rs. 1500) Cash Collection: Cash Balance at start Rs. 1,000,000 60% cash will be collected for current quarter and 40% will be in the next quarter. Required: Sales budget for the year 2016 and Cash Budgetarrow_forwardQUESTION 3: Based on the following assumptions and policies ; a) Prepare the budget for Collectables from Sales! b) Prepare the budget for Purchases! c) Prepare the budget of Cash Payment for Purchases! d) Set the company’s Cash Budget for 2021 BOARD Policies & Assumptions - Company’s projected sales for the three months as followings: Sales Forecast for 2021 January 2021 200.000 USD February 2021 220.000 USD March 2021 240.000 USD - All Sales are credited: %40 of sales are collected as in form of cash. %30 of sales are credited for 1 month and %30 of it for the next month. Rule: 40;30;30 - Accounts Receivables by quarter ending 31/12/2020 amounted to 120.000 USD a) 30.000 USD of Account Receivables belong to November Sales ( 11/2020) b) 90.000 USD of Account Receivables belong to December Sales ( 12/2020) - All purchases are credited: %50 of purchases are paid in advance and %50 of purchases are debited - Projected Inventories by the…arrow_forward
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