Question

Cash budget-Scenario analysis Trotter Enterprises, Inc., has gathered the following data in order to plan for its cash requirements and short-term investment opportunities for October, November, and December. All amounts are shown in thousands of dollars. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) October (5000) Pessi- Most mistic likely $261 $342 284 324 Opti mistic $460 421 November (5000) Pessi Most mistic likely $198 $289 202 261 Opti mistic $368 311 December (5000) Pessi Most mistic likely $189 $295 287 Opti mistic $355 313 Total cash receipts Total cash disbursements 331 a. Prepare a scenario analysis of Trotter's cash budget using - $21,000 as the beginning cash balance for October and a minimum required cash balance of $17,000. b. Use the analysis prepared in part a to predict Trotter's financing needs and investment opportunities over the months of October, November, and December. Discuss how knowledge of the timing and amounts involved can aid the planning process. a. Prepare a scenario analysis of Trotter's cash budget using - $21,000 as the beginning cash balance for October and a minimum required cash balance of $17,000. Complete the cash budget for the pessimistic scenario below: (Round to the nearest dollar.) Trotter Enterprises, Inc. Multiple Cash Budgets ($000) October November December Pessi- Pessi Pessi- mistic mistic mistic Total cash receipts $ 261 $ 198 $ 189 Total cash disbursements 284202287 Net cash flow $ $ Add: Beginning cash Ending cash Financing Cash balance $ $ $

Answer 1

Answer to Part a Trotter Enterprises, Inc. Multiple Cash Budgets ($000) October November October November December October November December December Most Likely Most Likely Most Likely Pessimistic Pessimistic Pessimistic Optimistic Optimistic Optimistic Total Cash Receipts Total Cash Disbursements 261 198 189 342 289 295 460 368 355 284 202 287 324 261 331 421 311 313 Net Cash Flow 57 -23 -4 98 18 28 -36 39 42 Add: Beginning Cash Ending Cash Financing Cash Balance -44 -21 -21 -48 -21 -3 25 18 75 -44 -48 18 -146 -3 25 -11 75 117 65 61 163 20 0 28 0 0 0 17 17 17 17 25 17 18 75 117 Answer to Part b Under the pessimistic scenario, Trotter will need to borrow funds upto $163,000 in December, whereas these financing needs are very smaller in mostly likely scenario. But, the Trotter has the sufficient cash in Optimistic scenario