1 Cash Budget Used to determine monthly needs and surpluses for cash during the planning period Examines timing of cash inflows and outflows i.e. when checks are written and when deposits are made. Payments to suppliers are typically made some time after shipment is received. Receipts from credit customers are received some time after sale is recorded.
1 Cash Budget Used to determine monthly needs and surpluses for cash during the planning period Examines timing of cash inflows and outflows i.e.
Dec 16, 2015
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1Cash BudgetCash Budget
Used to determine monthly needs and surpluses for cash during the planning period
Examines timing of cash inflows and outflows i.e. when checks are written and when deposits are made.
Payments to suppliers are typically made some time after shipment is received.
Receipts from credit customers are received some time after sale is recorded.
2Cash BudgetCash BudgetProblemProblem
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet the bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
3
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblemProblem
Collection of January Sales
Nov Dec Jan Feb Mar
Sales 130,000 125,000 120,000 260,000 140,00036,000
120,000x.30120,000x.30
4
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblemProblem
Collection of January Sales
Nov Dec Jan Feb Mar
Sales 130,000 125,000 120,000 260,000 140,00036,000
120,000x.30120,000x.30
60,000
120,000x.50120,000x.50
5
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblemProblem
Collection of January Sales
Nov Dec Jan Feb Mar
Sales 130,000 125,000 120,000 260,000 140,00036,000
120,000x.30120,000x.30
60,000 24,000
120,000x.50120,000x.50120,000x.20120,000x.20
6
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblem-- Determine CollectionsProblem-- Determine Collections
Cash BudgetHalsey Enterprises
November December January February MarchSales 130,000 125,000 120,000 260,000140,000Collections:Month of Sale (30%) 36,000First Month (50%)2nd Month (20%)Total Collections
120,000x.30120,000x.30
Determine January CollectionsDetermine January CollectionsDetermine January CollectionsDetermine January Collections
7
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblem-- Determine CollectionsProblem-- Determine Collections
Cash BudgetHalsey Enterprises
November December January February MarchSales 130,000 125,000 120,000 260,000140,000Collections:Month of Sale (30%) 36,000First Month (50%) 62,5002nd Month (20%)Total Collections 125,000x.50125,000x.50
Determine January CollectionsDetermine January CollectionsDetermine January CollectionsDetermine January Collections
8
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblem-- Determine CollectionsProblem-- Determine Collections
Cash BudgetHalsey Enterprises
November December January February MarchSales 130,000 125,000 120,000 260,000140,000Collections:Month of Sale (30%) 36,000First Month (50%) 62,5002nd Month (20%) 26,000Total Collections
130,000x.20130,000x.20
Determine January CollectionsDetermine January CollectionsDetermine January CollectionsDetermine January Collections
9
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblem-- Determine CollectionsProblem-- Determine Collections
Cash BudgetHalsey Enterprises
November December January February MarchSales 130,000 125,000 120,000 260,000140,000Collections:Month of Sale (30%) 36,000First Month (50%) 62,5002nd Month (20%) 26,000Total Collections 124,500
Determine January CollectionsDetermine January CollectionsDetermine January CollectionsDetermine January Collections
10
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblem-- Determine CollectionsProblem-- Determine Collections
Cash BudgetHalsey Enterprises
November December January February MarchSales 130,000 125,000 120,000 260,000140,000Collections:Month of Sale (30%) 36,000 78,000First Month (50%) 62,5002nd Month (20%) 26,000Total Collections 124,500
260,000x.30260,000x.30
Determine February CollectionsDetermine February CollectionsDetermine February CollectionsDetermine February Collections
11
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblem-- Determine CollectionsProblem-- Determine Collections
Cash BudgetHalsey Enterprises
November December January February MarchSales 130,000 125,000 120,000 260,000140,000Collections:Month of Sale (30%) 36,000 78,000First Month (50%) 62,500 60,0002nd Month (20%) 26,000Total Collections 124,500
120,000x.50120,000x.50
Determine February CollectionsDetermine February CollectionsDetermine February CollectionsDetermine February Collections
12
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblem-- Determine CollectionsProblem-- Determine Collections
Cash BudgetHalsey Enterprises
November December January February MarchSales 130,000 125,000 120,000 260,000140,000Collections:Month of Sale (30%) 36,000 78,000First Month (50%) 62,500 60,0002nd Month (20%) 26,000 25,000Total Collections 124,500
125,000x.20125,000x.20
Determine February CollectionsDetermine February CollectionsDetermine February CollectionsDetermine February Collections
13
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblem-- Determine CollectionsProblem-- Determine Collections
Cash BudgetHalsey Enterprises
November December January February MarchSales 130,000 125,000 120,000 260,000140,000Collections:Month of Sale (30%) 36,000 78,000First Month (50%) 62,500 60,0002nd Month (20%) 26,000 25,000Total Collections 124,500 163,000
Determine February CollectionsDetermine February CollectionsDetermine February CollectionsDetermine February Collections
14
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblem-- Determine CollectionsProblem-- Determine Collections
Cash BudgetHalsey Enterprises
November December January February MarchSales 130,000 125,000 120,000 260,000 140,000Collections:Month of Sale (30%) 36,000 78,000 42,000First Month (50%) 62,500 60,0002nd Month (20%) 26,000 25,000Total Collections 124,500 163,000
140,000x.30140,000x.30
Determine March CollectionsDetermine March CollectionsDetermine March CollectionsDetermine March Collections
15
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblem-- Determine CollectionsProblem-- Determine Collections
Cash BudgetHalsey Enterprises
November December January February MarchSales 130,000 125,000 120,000 260,000 140,000Collections:Month of Sale (30%) 36,000 78,000 42,000First Month (50%) 62,500 60,000 130,0002nd Month (20%) 26,000 25,000Total Collections 124,500 163,000
260,000x.50260,000x.50
Determine March CollectionsDetermine March CollectionsDetermine March CollectionsDetermine March Collections
16
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblem-- Determine CollectionsProblem-- Determine Collections
Cash BudgetHalsey Enterprises
November December January February MarchSales 130,000 125,000 120,000 260,000 140,000Collections:Month of Sale (30%) 36,000 78,000 42,000First Month (50%) 62,500 60,000 130,0002nd Month (20%) 26,000 25,000 24,000Total Collections 124,500 163,000
120,000x.20120,000x.20
Determine March CollectionsDetermine March CollectionsDetermine March CollectionsDetermine March Collections
17
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblem-- Determine CollectionsProblem-- Determine Collections
Cash BudgetHalsey Enterprises
November December January February MarchSales 130,000 125,000 120,000 260,000 140,000Collections:Month of Sale (30%) 36,000 78,000 42,000First Month (50%) 62,500 60,000 130,0002nd Month (20%) 26,000 25,000 24,000Total Collections 124,500 163,000 196,000
18Cash BudgetCash Budget
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
ProblemProblem
Payments for January Purchases
Nov Dec Jan Feb Mar
Sales 130,000 125,000 120,000 260,000 140,00090,000
75% of January Sales Purchased in November
75% of January Sales Purchased in November
19Cash BudgetCash Budget
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
ProblemProblem
Payments for January Purchases
Nov Dec Jan Feb Mar
Sales 130,000 125,000 120,000 260,000 140,00090,000
75% of January Sales Purchased in November, Paid for in December
75% of January Sales Purchased in November, Paid for in December
90,000
20
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblem-- Determine Material PurchasesProblem-- Determine Material Purchases
Cash BudgetHalsey Enterprises
Sales 130,000 125,000 120,000 260,000 140,000 140,000Purchases 195,000Payments 195,000
November December January February March April
260,000x.75260,000x.75
Determine January PaymentsDetermine January PaymentsDetermine January PaymentsDetermine January Payments
21
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblem-- Determine Material PurchasesProblem-- Determine Material Purchases
Cash BudgetHalsey Enterprises
Sales 130,000 125,000 120,000 260,000 140,000 140,000Purchases 195,000 105,000Payments 195,000 105,000
November December January February March April
140,000x.75140,000x.75
Determine February PaymentsDetermine February PaymentsDetermine February PaymentsDetermine February Payments
22
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblem-- Determine Material PurchasesProblem-- Determine Material Purchases
Cash BudgetHalsey Enterprises
Sales 130,000 125,000 120,000 260,000 140,000 140,000Purchases 195,000 105,000 105,000Payments 195,000 105,000 105,000
November December January February March April
140,000x.75140,000x.75
Determine March PaymentsDetermine March PaymentsDetermine March PaymentsDetermine March Payments
23
Halsey Enterprises has projected its sales for the first four months of 1996 as follows:
January $120,000 March $140,000February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the month following the sale, and the remaining 20 percent two months following the sale. During November and December of 1995 Halsey’s sales were $130,000 and $125,000, respectively.Halsey purchases raw materials two months in advance of its sales equal to 75 percent of its final sales. The supplier is paid one month after delivery.In addition, Halsey pays $2,000 per month for rent and $12,000 each month for other expenditures. Taxes are due in March and amount to $10,000. As of December 31, 1995 the company’s cash balance was $28,000; a minimum balance of $25,000 must be maintained to meet bank’s line of credit agreement. Halsey can borrow short term from its bank at a cost of 1/2% per month. They have a policy to repay short term debt in any month its cash balance exceeds the minimum desired balance of $25,000. Prepare a cash budget for Halsey.
Cash BudgetCash BudgetProblem-- Determine Material PurchasesProblem-- Determine Material Purchases
Cash BudgetHalsey Enterprises
Sales 130,000 125,000 120,000 260,000 140,000 140,000Purchases 195,000 105,000 105,000Payments 195,000 105,000 105,000
November December January February March April
24Cash BudgetCash BudgetProblem-- Cash Inflows & OutflowsProblem-- Cash Inflows & Outflows
Cash BudgetHalsey Enterprises
Cash Collections 124,500 163,000 196,000Material Payments 195,000 105,000 105,000
January February March
Summary of Previous SheetsSummary of Previous Sheets
25Cash BudgetCash BudgetProblem-- Cash Inflows & OutflowsProblem-- Cash Inflows & Outflows
Cash BudgetHalsey Enterprises
Cash Collections 124,500 163,000 196,000Material Payments 195,000 105,000 105,000Other Payments:Rent 2,000 2,000 2,000Other Expenses 12,000 12,000 12,000Tax Payments 0 0 10,000
January February March
Remaining Cash OutflowsRemaining Cash Outflows
26Cash BudgetCash BudgetProblem-- Cash Inflows & OutflowsProblem-- Cash Inflows & Outflows
Cash BudgetHalsey Enterprises
Cash Collections 124,500 163,000 196,000Material Payments 195,000 105,000 105,000Other Payments:Rent 2,000 2,000 2,000Other Expenses 12,000 12,000 12,000Tax Payments 0 0 10,000Net Monthly Change (84,500) 44,000 67,000
January February March
27Cash BudgetCash BudgetProblem-- Analysis of Borrowing NeedsProblem-- Analysis of Borrowing Needs
Cash BudgetHalsey Enterprises
Net Monthly Change (84,500) 44,000 67,000Beginning Cash Balance 28,000Ending Cash (No Borrow)Needed (Borrowing)Loan RepaymentInterest CostEnding Cash BalanceCumulative Borrowing
January February March
28Cash BudgetCash BudgetProblem-- Analysis of Borrowing NeedsProblem-- Analysis of Borrowing Needs
Cash BudgetHalsey Enterprises
Net Monthly Change (84,500) 44,000 67,000Beginning Cash Balance 28,000Ending Cash (No Borrow) (56,500)Needed (Borrowing)Loan RepaymentInterest CostEnding Cash BalanceCumulative Borrowing
January February March
29Cash BudgetCash BudgetProblem-- Analysis of Borrowing NeedsProblem-- Analysis of Borrowing Needs
Cash BudgetHalsey Enterprises
Net Monthly Change (84,500) 44,000 67,000Beginning Cash Balance 28,000Ending Cash (No Borrow) (56,500)Needed (Borrowing)Loan RepaymentInterest CostEnding Cash Balance 25,000Cumulative Borrowing
January February March
Target Ending BalanceTarget Ending Balance
30Cash BudgetCash BudgetProblem-- Analysis of Borrowing NeedsProblem-- Analysis of Borrowing Needs
Cash BudgetHalsey Enterprises
Net Monthly Change (84,500) 44,000 67,000Beginning Cash Balance 28,000Ending Cash (No Borrow) (56,500)Needed (Borrowing) 81,500Loan RepaymentInterest CostEnding Cash Balance 25,000Cumulative Borrowing
January February March
Borrowing Required to cover Minimum Balance and Deficit
Borrowing Required to cover Minimum Balance and Deficit
56,500+25,000
31Cash BudgetCash BudgetProblem-- Analysis of Borrowing NeedsProblem-- Analysis of Borrowing Needs
Cash BudgetHalsey Enterprises
Net Monthly Change (84,500) 44,000 67,000Beginning Cash Balance 28,000Ending Cash (No Borrow) (56,500)Needed (Borrowing) 81,500Loan Repayment 0Interest Cost 0Ending Cash Balance 25,000Cumulative Borrowing 81,500
January February March
32Cash BudgetCash BudgetProblem-- Analysis of Borrowing NeedsProblem-- Analysis of Borrowing Needs
Cash BudgetHalsey Enterprises
Net Monthly Change (84,500) 44,000 67,000Beginning Cash Balance 28,000 25,000Ending Cash (No Borrow) (56,500) 69,000Needed (Borrowing) 81,500Loan Repayment 0Interest Cost 0Ending Cash Balance 25,000Cumulative Borrowing 81,500
January February March
33Cash BudgetCash BudgetProblem-- Analysis of Borrowing NeedsProblem-- Analysis of Borrowing Needs
Cash BudgetHalsey Enterprises
Net Monthly Change (84,500) 44,000 67,000Beginning Cash Balance 28,000 25,000Ending Cash (No Borrow) (56,500) 69,000Needed (Borrowing) 81,500 0Loan Repayment 0Interest Cost 0Ending Cash Balance 25,000 25,000Cumulative Borrowing 81,500
January February March
Target Ending BalanceTarget Ending Balance
34Cash BudgetCash BudgetProblem-- Analysis of Borrowing NeedsProblem-- Analysis of Borrowing Needs
Cash BudgetHalsey Enterprises
Net Monthly Change (84,500) 44,000 67,000Beginning Cash Balance 28,000 25,000Ending Cash (No Borrow) (56,500) 69,000Needed (Borrowing) 81,500 0Loan Repayment 0Interest Cost 0 408Ending Cash Balance 25,000 25,000Cumulative Borrowing 81,500
January February March
Interest Incurred on PriorMonth Borrowing
Interest Incurred on PriorMonth Borrowing
81,500 x .005
35Cash BudgetCash BudgetProblem-- Analysis of Borrowing NeedsProblem-- Analysis of Borrowing Needs
Cash BudgetHalsey Enterprises
Net Monthly Change (84,500) 44,000 67,000Beginning Cash Balance 28,000 25,000Ending Cash (No Borrow) (56,500) 69,000Needed (Borrowing) 81,500 0Loan Repayment 0 43,592Interest Cost 0 408Ending Cash Balance 25,000 25,000Cumulative Borrowing 81,500
January February March
Amount that can be repaid from monthly surplus
Amount that can be repaid from monthly surplus
69,000 - 408 - 25,000
36Cash BudgetCash BudgetProblem-- Analysis of Borrowing NeedsProblem-- Analysis of Borrowing Needs
Cash BudgetHalsey Enterprises
Net Monthly Change (84,500) 44,000 67,000Beginning Cash Balance 28,000 25,000Ending Cash (No Borrow) (56,500) 69,000Needed (Borrowing) 81,500 0Loan Repayment 0 43,592Interest Cost 0 408Ending Cash Balance 25,000 25,000Cumulative Borrowing 81,500 37,908
January February March
New Loan BalanceNew Loan Balance
81,500 - 43,592
37Cash BudgetCash BudgetProblem-- Analysis of Borrowing NeedsProblem-- Analysis of Borrowing Needs
Cash BudgetHalsey Enterprises
Net Monthly Change (84,500) 44,000 67,000Beginning Cash Balance 28,000 25,000 25,000Ending Cash (No Borrow) (56,500) 69,000 92,000Needed (Borrowing) 81,500 0Loan Repayment 0 43,592Interest Cost 0 408Ending Cash Balance 25,000 25,000Cumulative Borrowing 81,500 37,908
January February March
38Cash BudgetCash BudgetProblem-- Analysis of Borrowing NeedsProblem-- Analysis of Borrowing Needs
Cash BudgetHalsey Enterprises
Net Monthly Change (84,500) 44,000 67,000Beginning Cash Balance 28,000 25,000 25,000Ending Cash (No Borrow) (56,500) 69,000 92,000Needed (Borrowing) 81,500 0 0Loan Repayment 0 43,592Interest Cost 0 408 190Ending Cash Balance 25,000 25,000Cumulative Borrowing 81,500 37,908
January February March
Interest Incurred on PriorMonth Borrowing
Interest Incurred on PriorMonth Borrowing
37,908 x .005
39Cash BudgetCash BudgetProblem-- Analysis of Borrowing NeedsProblem-- Analysis of Borrowing Needs
Cash BudgetHalsey Enterprises
Net Monthly Change (84,500) 44,000 67,000Beginning Cash Balance 28,000 25,000 25,000Ending Cash (No Borrow) (56,500) 69,000 92,000Needed (Borrowing) 81,500 0 0Loan Repayment 0 43,592 37,908Interest Cost 0 408 190Ending Cash Balance 25,000 25,000Cumulative Borrowing 81,500 37,908
January February March
Repay Outstanding Loan Balance
Repay Outstanding Loan Balance
40Cash BudgetCash BudgetProblem-- Analysis of Borrowing NeedsProblem-- Analysis of Borrowing Needs
Cash BudgetHalsey Enterprises
Net Monthly Change (84,500) 44,000 67,000Beginning Cash Balance 28,000 25,000 25,000Ending Cash (No Borrow) (56,500) 69,000 92,000Needed (Borrowing) 81,500 0 0Loan Repayment 0 43,592 37,908Interest Cost 0 408 190Ending Cash Balance 25,000 25,000 53,902Cumulative Borrowing 81,500 37,908 0
January February March
Ending Cash BalanceEnding Cash Balance
92,000-37,908-190
41Cash BudgetCash BudgetProblem-- Analysis of Borrowing NeedsProblem-- Analysis of Borrowing Needs
Cash BudgetHalsey Enterprises
Net Monthly Change (84,500) 44,000 67,000Beginning Cash Balance 28,000 25,000 25,000Ending Cash (No Borrow) (56,500) 69,000 92,000Needed (Borrowing) 81,500 0 0Loan Repayment 0 43,592 37,908Interest Cost 0 408 190Ending Cash Balance 25,000 25,000 53,902Cumulative Borrowing 81,500 37,908 0
January February March
Ending Cash BalanceEnding Cash Balance
$28,902 Surplus
42Cash BudgetCash BudgetProblem-- Analysis of Borrowing NeedsProblem-- Analysis of Borrowing Needs
Cash BudgetHalsey Enterprises
Net Monthly Change (84,500) 44,000 67,000Beginning Cash Balance 28,000 25,000 25,000Ending Cash (No Borrow) (56,500) 69,000 92,000Needed (Borrowing) 81,500 0 0Loan Repayment 0 43,592 37,908Interest Cost 0 408 190Ending Cash Balance 25,000 25,000 53,902Cumulative Borrowing 81,500 37,908 0
January February March
Halsey needs to raise $81,500 in short term debt in January, would probably take out a short term bank loan. In March has a 28,902 surplus, would probably invest in marketable securities at this point in time
43
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