23 Jul WILL THE FIRM HAVE SUFFICIENT CASH TO REPAY THE LOAN?
Harrison Printing has projected its sales for the first eight months Show more (Preparation of a cash budget) Harrison Printing has projected its sales for the first eight months of 2011 as follows: January $100000 May $275000 February 120000 June 200000 March 150000 July 200000 April 300000 August 180000 Harrison collects 20 percent of its sales in the month of the sale 50 percent in the month following the sale and the remaining 30 percent two months following the sale. During November and December of 2010 Harrisons sales were $220000 and $175000 respectively. Harrison purchases raw materials two months in advance of its sales equal to 65 percent of its final sales price. The supplier is paid one month after delivery. Thus purchases for April sales are made in February and payment is made in March. In addition Harrison pays $10000 per month for rent and $20000 each month for other expenditures. Tax prepayments of $22500 are made each quarter beginning in March. The companys cash balance as of December 31 2010 was $22000; a minimum balance of $20000 must be maintained at all times to satisfy the firms bank line of credit agreement. Harrison has arranged with its bank for short-term credit at an interest 586587rate of 12 percent per annum (1 percent per month) to be paid monthly. Borrowing to meet estimated monthly cash needs takes place at the end of the month and interest is not paid until the end of the following month. Consequently if the firm were to need to borrow $50000 during the month of April then it would pay $500 (= .01 $50000) in interest during May. Finally Harrison follows a policy of repaying its outstanding short-term debt in any month in which its cash balance exceeds the minimum desired balance of $20000. a. Harrison needs to know what its cash requirements will be for the next six months so that if necessary it can renegotiate the terms of its short-term credit agreement with its bank. To analyze this problem the firm plans to evaluate the impact of a 20 percent variation in its monthly sales efforts. Prepare a six-month cash budget for Harrison and use it to evaluate the firms cash needs. b. Harrison has a $200000 note due in June. Will the firm have sufficient cash to repay the loan? Show less
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.