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    Quarterly Cash Budget

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    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        

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    · Construct a quarterly cash budget for Lawrence

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

    Solution Summary

    The solution explains how to prepare a quarterly cash budget