Question

2.Given the following information, how much of a line of credit is appropriate? (Jackie's Toy Manufacturer – 2005 Cash Budget for SEPT – NOV in $1,000,000s). Thirty percent of sales are for cash and the balance is collected the month following the sales. Seventy percent of the purchases are for cash and the balance is paid the month following the purchase. The required balance is 50.

Sales                                        400      500      800      1,000  

Purchases                                250      375      500      600                

                                                 AUG   SEPT   OCT   NOV  

Cash Inflows:                         x         

Cash Sales                               x           150       240       300   

Collect AR                              x          280      350         ___ (FILL IN)

Other                                       x          70        80      1,500

Total Cash Inflows                            500      670      ___ (FILL IN)

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Cash Outflows:                      x

Cash Purchases                       x         262.5    350       420

Pay AP                                    x          75.      ___      ___ (FILL IN)

Other                                       x          140       150      155

Asset Purchase                                     500      x          x

Total Cash Outflows                       977.5      ___      ___ (FILL IN)

NET CASH FLOW                        -477.5     ___      ___ (FILL IN)

-----------------------------------------------------------------------------------------                    

Beg Bal.                                               50                   

End Bal.                                               ___      ___      ___ (FILL IN)

R_________                                       ___      ___      ___ (FILL IN)

                                   

Surp(Loan)    _____________________________________________                                                

1. Line of Credit or loan needed is    $__________________________.

Answer 1

Cash Budget
Particular	SEP	Oct	Nov
Cash Balance at Begining	50	50	50
Cash inflow
Account receivable	280	350	560
Cash sales	150	240	300
other	70	80	1500
Total Cash inflow	500	670	2360
Cash outflow
Cash purchases	262.5	350	420
Account payable	75	112.5	150
other	140	150	155
asset purchase	500	0	0
Repayment of Loan	0	57.5	420
Total cash outflow	977.5	670	1145
Closing cash	50	50	1265
Surplus/ ( Loan)	-477.5	0	1215
Total Loan needed in sep	477.5

Assume Loan will be taken in September month will repaid when sufficient cash is available