fm22 17 - 0.1(Sales 2 Months Ago) 7,121.80 6,821.20 (5)...

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d. What might SKI do to reduce its cash without harming operations? Answer: To the extent that “cash and securities” consist of low-yielding securities, they could be sold off and the cash generated could be used to reduce debt, to buy back stock, or to invest in operating assets. In an attempt to better understand SKI’s cash position, Barnes developed a cash budget. Data for the first two months of the year are shown below. (Note that Barnes’ preliminary cash budget does not account for interest income or interest expense.) He has the figures for the other months, but they are not shown. SKI’S CASH BUDGET FOR JANUARY AND FEBRUARY November December January February March April I. Collections And Purchases Worksheet (1) Sales (Gross) $71,218 $68,212.00 $65,213.00 $52,475.00 $42,909 $30,524 Collections: (2) During Month Of Sale (0.2)(0.98)(Month’s Sales) 12,781.75 10,285.10 (3) During First Month After Sale 0.7(Previous Month’s Sales) 47,748.40 45,649.10 (4) During Second Month After Sale
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Unformatted text preview: 0.1(Sales 2 Months Ago) 7,121.80 6,821.20 (5) Total Collections (Lines 2 + 3 + 4) $67,651.95 $62,755.40 Purchases: (6) 0.85(Forecasted Sales 2 Months From Now) $44,603.75 $36,472.65 $25,945.40 (7) Payments (1-Month Lag) 44,603.75 36,472.65 II. Cash Gain Or Loss For Month (8) Collections (From Section I) $67,651.95 $62,755.40 (9) Payments For Purchases (From Section I) 44,603.75 36,472.65 (10) Wages And Salaries 6,690.56 5,470.90 (11) Rent 2,500.00 2,500.00 (12) Taxes (13) Total Payments $53,794.31 $44,443.55 (14) Net Cash Gain (Loss) During Month (Line 8 - Line 13) $13,857.64 $18,311.85 III. Cash Surplus Or Loan Requirement (15) Cash At Beginning Of Month If No Borrowing Is Done $ 3,000.00 $16,857.64 (16) Cumulative Cash (Cash At Start, + Gain Or - Loss = Line 14 + Line 15) 16,857.64 35,169.49 (17) Target Cash Balance 1,500.00 1,500.00 (18) Cumulative Surplus Cash Or Loans Outstanding To Maintain $1,500 Target Cash Balance (Line 16 - Line 17) $15,357.64 $33,669.49 Mini Case: 22 - 17...
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