Cash is King!Good cash management is an essential job of the financial manager! You own a small auto sales business called King
Kars. You stock up on inventory in February, April, June, and September. Your annual cash budget indicates that your MONTHLY NET CASH for the year will be the following:JAN $5,000FEB -$30,000MAR $20,000APRIL -$35,000MAY $25,000JUNE -$10,000JULY $25,000AUG $25,000SEPT -$30,000OCT $15,000NOV $15,000DEC $25,000You begin the year with a cash balance of $50,000, and the minimum cash balance desired must be $50,000 every month. Prepare a cash flow summary and external financing summary as noted in the Excel spreadsheet assigned to this submission.
1. Do you believe that the company needs outside financing?
2. What is the minimum line of credit to request from a lender?
3. Do you think you are a good candidate for the line of credit? Why?
1. Do you believe that the company needs outside financing?
2. What is the minimum line of credit to request from a lender?
3. Do you think you are a good candidate for the line of credit? Why?
1 answer:
Answer:
The solution to the given problem is given below.
Explanation:
1. Do you believe that the company needs outside financing?
Yes, Company needs outside finance total $ 40,000 as $25,000 in month of Feb and $15,000 in month of Apr il.
2. What is the minimum line of credit to request from a lender?
Minimum line of credit needed is $40,000
3. Do you think you are a good candidate for the line of credit? Why?
Yes, we are good candidate for line of credit because we can start repayment by May and repay by July and after repayment we will have ending March Cash balance $100,000 .
Detailed calculations are attached with the image.
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Option 'C' is correct
<u>Explanation:</u>
Present value of an ordinary annuity of $1
The present value of an annuity is the current value of future payments from an annuity, given a specified rate of return or discount rate.
The future estimation of cash is determined by utilizing a rebate rate. The markdown rate alludes to a financing cost or an accepted pace of profit for different speculations. The littlest markdown rate utilized in these figurings is the hazard free pace of return. U.S. Treasury bonds are commonly viewed as the nearest thing to a hazard-free venture, so their arrival is regularly utilized for this reason.