Question

The cash budget: Sit Down Corporation has a cash balance of $32,500 on April 1. The company must maintain a minimum cash balance of $30,000. During April, expected cash receipts are $48,500. Cash disbursements during the month are expected to total $56,100. Ignoring interest payments, how much will the company need to borrow during April?

Answer 1

Answer:

$5,100

Explanation:

Initial cash balance (IB) = $32,500

Expected cash receipts (EC) = $48,500.

Cash disbursements (CD) = $56,100

Amount borrowed (B) = ?

Assuming that the final balance must equal at least $30,000, the cash flow for april is given by:

$\ 30,000 = IB +EC-CD+B \\B= \ 30,000 -\ 32,500- 48,500+\ 56,100\\B=\ 5,100$

Sit Down Corporation will need to borrow $5,100 during April to maintain a minimum cash balance of $30,000.