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case 5 almost done - 5 Think about the mechanics of the...

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5.  Think about the mechanics of the bank loan.  During a typical month, the  funds needed or the cash surplus would be changing daily.  Could the  company increase or decrease its loan on a daily basis?  If not, would this  have any affect on the amount of funds needed? Banks do not “make” loans on a daily basis .  Banks establish lines of  credit with businesses, which allow businesses to deposit or withdraw funds,  up to a certain amount, each day as the business feels it is necessary.  Therefore, with a line of credit established, Alpine could withdraw extra  money when needed, and deposit extra money when they have it.   If Alpine  could not establish a line of credit, and only borrow on a monthly basis, this  would greatly affect the amount of funds needed since Alpine’s business is  seasonal. Q7. The only receipts shown in Alpine Wear’s cash budget are collections. What are some other types of inflows that could occur? Also, the budget ignored short-term interest expense and income. If the company paid interest at 7 percent annually on the short term bank loan and
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