General and administravitve salaries are approximately $27,000 a month. Lease paymentsunder long-term leases are $9,000 a month. Depreciation charges are $36,000 a month. Miscellaneous expenses are $2700 a month. Income tax payments of $63,000 are due in September an December. A progress payment of $180,000 on a new design studio must be paid in October. Cash on hand on July 1 will be $132,000 and a miimum cash balance of $90,000 should be maintained throughout the cash budget period.
A. Prepare a monthly cash budget for the last 6 months of 2014
B. Prepare a monthly estimates of the requried financing or excess funds-that is the amount of money Bowers will need to borrow or will have available to invest.
C. Now suppose receipts from sales come in uniformly during the month (that is, cash receipts come in at the rate of 1/30 each day) but all outflows must be paid on the 5th. Will this affect cash budget? That is will the cash budget you prepared be valid estimate of the peak finnancing requirements? No calculations are required, although if you prefer you can use calclations to illistatethe effects.
D Bowers sales are seasonal; and her company produces on seasonal asis, just ahead of sales. Without making any calculations, discuss how the copans current and debt ratios would vary during the year if all finacial requirements were met with short-term bank loands. Could changes in these ratios affect the firm's ability to obtain bank credit?