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Quarterly Cash Budget

Given the new details below to do the following:
· Construct a quarterly cash budget for Lawrence
· Tell me what is the largest amount of bank debt needed and when is it needed
· Circle them in the on the borrowing line of the matrix
· What is the largest amount of surplus cash flow generated by Lawrence and when does it happen?
· Should Lawrence change their credit terms

Everything in the initial case remains the same with the exception of the credit policy which has been changed and the effects on receivable collection are as follows.

The company wants to institute a new credit policy that is 5/10 net 30. It is believed that the revised pattern for Cash received on credit sales will amount to 50 percent in the current month of sales, 50 percent in the month following the sales.

Revised Case

Quarter 1 Quarter 2 Quarter 3 Quarter 4
Inflows Work space
Cash sales        
Month 1        
Month 2      
Month 3        
Total Quarterly Cash Sales        
Collections Month 1      
Collections Month 2        
Collections Month 3      
Total Quarterly Collections        
Outflows Work space      
Raw Materials        
Month 1      
Month 2        
Month 3      
Quarterly Raw materials Costs        
Operating Expenses      
Month 1        
Month 2      
Month 3      
Quarterly Operating Expenses    
Calculation Space      
Cash Inflows        
Total Quarterly Cash Sales        
Total Quarterly Collections      
Total Quarterly cash Inflows        
Cash Outflows      
Total Quarterly Raw Materials        
Total Quarterly Operating Expenses      
Total Quarterly Cash Outflows        
Pretax Quarterly Cash Flows        
Quarterly estimated Taxes      
Net Quarterly Cash Flows        
Beginning Cash Position 50,000      
Net Quarterly Cash flows      
Closing Quarterly Cash Position        
Required Minimum Cash Position 20,000 20,000 20,000 20,000
Required Borrowings For the Quarter        
Previous Borrowings Repaid        
Final Quarterly Cash balance        

Solution Preview

Please see the attached file.

· Construct a quarterly cash budget for Lawrence

This is given above

· Tell me what is the largest amount of ...

Solution Summary

The solution explains how to prepare a quarterly cash budget