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.
 2

Budgets
Budget: a forecast of future
events.
 3

Budgets
1. Budgets indicate the amount
and timing of future financing
needs.
2. Budgets provide a basis for
taking corrective action if
budgeted and actual figures do
not match.
3. Budgets provide the basis for
performance evaluation.
 4
Cash Budget

• It is a detailed plan of future cash

receipts and disbursements.

Elements of Cash Budget

1. Cash receipts
2. Cash disbursements
3. Net change in cash for the period
4. New financing needed
 5
Cash Budget
Problem
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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.
 6
Cash Budget
Problem
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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
75Collection
percent of itsoffinal sales. The
January supplier is paid one month after delivery.
Sales
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
for other expenditures.
Nov Taxes are due
Dec Janin March and amount to $10,000.
Feb Mar 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
Sales 130,000 borrow short
125,000 term from its
120,000 bank at a cost
260,000 of 1/2% per
140,000
month. They have a policy to repay short term debt in any month its cash
balance exceeds the minimum desired 36,000balance of $25,000. Prepare a cash
budget for Halsey.
120,000x.30
 7
Cash Budget
Problem
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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
75Collection
percent of itsoffinal sales. The
January supplier is paid one month after delivery.
Sales
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
for other expenditures.
Nov Taxes are due
Dec Janin March and amount to $10,000.
Feb Mar 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
Sales 130,000 borrow short
125,000 term from its
120,000 bank at a cost
260,000 of 1/2% per
140,000
month. They have a policy to repay short term debt in any month its cash
balance exceeds the minimum desired 36,000balance of60,000
$25,000. Prepare a cash
budget for Halsey.
120,000x.30 120,000x.50
 8
Cash Budget
Problem
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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
75Collection
percent of itsoffinal sales. The
January supplier is paid one month after delivery.
Sales
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
for other expenditures.
Nov Taxes are due
Dec Janin March and amount to $10,000.
Feb Mar 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
Sales 130,000 borrow short
125,000 term from its
120,000 bank at a cost
260,000 of 1/2% per
140,000
month. They have a policy to repay short term debt in any month its cash
balance exceeds the minimum desired 36,000balance of60,000 24,000
$25,000. Prepare a cash
budget for Halsey.
120,000x.30 120,000x.50 120,000x.20
 9
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month followingJanuary
Determine the sale, and the remaining 20 percent two months following
Collections
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. TheCash Budget
supplier is paid one month after delivery.
In addition, Halsey pays $2,000 Halsey Enterprises
per month for rent and $12,000 each month
for other expenditures.
NovemberTaxes December
are due in March
Januaryand amount to $10,000.
February MarchAs of
December 31, 1995 the company’s cash balance was $28,000; a minimum
balanceSales 130,000
of $25,000 must be125,000
maintained120,000 260,000140,000
to meet bank’s line of credit
Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They
Monthhave a policy
of Sale to repay short
(30%) term debt in any month its cash
36,000
balanceFirst
exceeds
Month the(50%)
minimum desired balance of $25,000. Prepare a cash
budget for Halsey.
2nd Month (20%) 120,000x.30
Total Collections
 10
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month followingJanuary
Determine the sale, and the remaining 20 percent two months following
Collections
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. TheCash Budget
supplier is paid one month after delivery.
In addition, Halsey pays $2,000 Halsey Enterprises
per month for rent and $12,000 each month
for other expenditures.
NovemberTaxes December
are due in March
Januaryand amount to $10,000.
February MarchAs of
December 31, 1995 the company’s cash balance was $28,000; a minimum
balanceSales 130,000
of $25,000 must be125,000
maintained120,000 260,000140,000
to meet bank’s line of credit
Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They
Monthhave a policy
of Sale to repay short
(30%) term debt in any month its cash
36,000
balanceFirst
exceeds
Month the(50%)
minimum desired balance
62,500 of $25,000. Prepare a cash
budget for Halsey.
2nd Month (20%) 125,000x.50
Total Collections
 11
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month followingJanuary
Determine the sale, and the remaining 20 percent two months following
Collections
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. TheCash Budget
supplier is paid one month after delivery.
In addition, Halsey pays $2,000 Halsey Enterprises
per month for rent and $12,000 each month
for other expenditures.
NovemberTaxes December
are due in March
Januaryand amount to $10,000.
February MarchAs of
December 31, 1995 the company’s cash balance was $28,000; a minimum
balanceSales 130,000
of $25,000 must be125,000
maintained120,000 260,000140,000
to meet bank’s line of credit
Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They
Monthhave a policy
of Sale to repay short
(30%) term debt in any month its cash
36,000
balanceFirst
exceeds
Month the(50%)
minimum desired balance
62,500 of $25,000. Prepare a cash
budget for Halsey.
2nd Month (20%) 26,000 130,000x.20
Total Collections
 12
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $260,000 April $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month followingJanuary
Determine the sale, and the remaining 20 percent two months following
Collections
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. TheCash Budget
supplier is paid one month after delivery.
In addition, Halsey pays $2,000 Halsey Enterprises
per month for rent and $12,000 each month
for other expenditures.
NovemberTaxes December
are due in March
Januaryand amount to $10,000.
February MarchAs of
December 31, 1995 the company’s cash balance was $28,000; a minimum
balanceSales 130,000
of $25,000 must be125,000
maintained120,000 260,000140,000
to meet bank’s line of credit
Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They
Monthhave a policy
of Sale to repay short
(30%) term debt in any month its cash
36,000
balanceFirst
exceeds
Month the(50%)
minimum desired balance
62,500 of $25,000. Prepare a cash
budget for Halsey.
2nd Month (20%) 26,000
Total Collections 124,500
 13
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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
Determine February Collections
$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. TheCash Budget
supplier is paid one month after delivery.
In addition, Halsey pays $2,000 Halsey Enterprises
per month for rent and $12,000 each month
for other expenditures.
NovemberTaxes December
are due in March
Januaryand amount to $10,000.
February MarchAs of
December 31, 1995 the company’s cash balance was $28,000; a minimum
balanceSales 130,000
of $25,000 must be125,000
maintained120,000 260,000140,000
to meet bank’s line of credit
Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They
Monthhave a policy
of Sale to repay short
(30%) term debt in78,000
36,000 any month its cash
balanceFirst
exceeds
Month the(50%)
minimum desired balance
62,500 of $25,000. Prepare a cash
budget for Halsey.
2nd Month (20%) 26,000
Total Collections 260,000x.30124,500
 14
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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
Determine February Collections
$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. TheCash Budget
supplier is paid one month after delivery.
In addition, Halsey pays $2,000 Halsey Enterprises
per month for rent and $12,000 each month
for other expenditures.
NovemberTaxes December
are due in March
Januaryand amount to $10,000.
February MarchAs of
December 31, 1995 the company’s cash balance was $28,000; a minimum
balanceSales 130,000
of $25,000 must be125,000
maintained120,000 260,000140,000
to meet bank’s line of credit
Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They
Monthhave a policy
of Sale to repay short
(30%) term debt in78,000
36,000 any month its cash
balanceFirst
exceeds
Month the(50%)
minimum desired balance
62,500 of $25,000.
60,000 Prepare a cash
budget for Halsey.
2nd Month (20%) 26,000
Total Collections 120,000x.50124,500
 15
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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
Determine February Collections
$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. TheCash Budget
supplier is paid one month after delivery.
In addition, Halsey pays $2,000 Halsey Enterprises
per month for rent and $12,000 each month
for other expenditures.
NovemberTaxes December
are due in March
Januaryand amount to $10,000.
February MarchAs of
December 31, 1995 the company’s cash balance was $28,000; a minimum
balanceSales 130,000
of $25,000 must be125,000
maintained120,000 260,000140,000
to meet bank’s line of credit
Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They
Monthhave a policy
of Sale to repay short
(30%) term debt in78,000
36,000 any month its cash
balanceFirst
exceeds
Month the(50%)
minimum desired balance
62,500 of $25,000.
60,000 Prepare a cash
budget for Halsey.
2nd Month (20%) 26,000 25,000
Total Collections 125,000x.20124,500
 16
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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
Determine February Collections
$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. TheCash Budget
supplier is paid one month after delivery.
In addition, Halsey pays $2,000 Halsey Enterprises
per month for rent and $12,000 each month
for other expenditures.
NovemberTaxes December
are due in March
Januaryand amount to $10,000.
February MarchAs of
December 31, 1995 the company’s cash balance was $28,000; a minimum
balanceSales 130,000
of $25,000 must be125,000
maintained120,000 260,000140,000
to meet bank’s line of credit
Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They
Monthhave a policy
of Sale to repay short
(30%) term debt in78,000
36,000 any month its cash
balanceFirst
exceeds
Month the(50%)
minimum desired balance
62,500 of $25,000.
60,000 Prepare a cash
budget for Halsey.
2nd Month (20%) 26,000 25,000
Total Collections 124,500 163,000
 17
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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 Determine
remainingMarch Collections
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. TheCash Budget
supplier is paid one month after delivery.
In addition, Halsey pays $2,000 Halsey Enterprises
per month for rent and $12,000 each month
for other expenditures.
NovemberTaxes December
are due in March
Januaryand amount to $10,000.
February MarchAs of
December 31, 1995 the company’s cash balance was $28,000; a minimum
balanceSales 130,000
of $25,000 must be125,000
maintained120,000 260,000
to meet bank’s 140,000
line of credit
Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They
Monthhave a policy
of Sale to repay short
(30%) term debt in78,000
36,000 any month its cash
42,000
balanceFirst
exceeds
Month the(50%)
minimum desired balance
62,500 of $25,000.
60,000 Prepare a cash
budget for Halsey. 140,000x.30
2nd Month (20%) 26,000 25,000
Total Collections 124,500 163,000
 18
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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 Determine
remainingMarch Collections
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. TheCash Budget
supplier is paid one month after delivery.
In addition, Halsey pays $2,000 Halsey Enterprises
per month for rent and $12,000 each month
for other expenditures.
NovemberTaxes December
are due in March
Januaryand amount
Februaryto $10,000.
MarchAs of
December 31, 1995 the company’s cash balance was $28,000; a minimum
balanceSales 130,000
of $25,000 must be125,000
maintained120,000 260,000
to meet bank’s 140,000
line of credit
Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They
Monthhave a policy
of Sale to repay short
(30%) term debt in78,000
36,000 any month its cash
42,000
balanceFirst
exceeds
Month the(50%)
minimum desired balance
62,500 of $25,000.
60,000 Prepare a cash
130,000
budget for Halsey. 260,000x.50
2nd Month (20%) 26,000 25,000
Total Collections 124,500 163,000
 19
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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 Determine
remainingMarch Collections
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. TheCash Budget
supplier is paid one month after delivery.
In addition, Halsey pays $2,000 Halsey Enterprises
per month for rent and $12,000 each month
for other expenditures.
NovemberTaxes December
are due in March
Januaryand amount to $10,000.
February MarchAs of
December 31, 1995 the company’s cash balance was $28,000; a minimum
balanceSales 130,000
of $25,000 must be125,000
maintained120,000 260,000
to meet bank’s 140,000
line of credit
Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They
Monthhave a policy
of Sale to repay short
(30%) term debt in78,000
36,000 any month its cash
42,000
balanceFirst
exceeds
Month the(50%)
minimum desired balance
62,500 of $25,000.
60,000 Prepare a cash
130,000
budget for Halsey. 120,000x.20
2nd Month (20%) 26,000 25,000 24,000
Total Collections 124,500 163,000
 20
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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. TheCash Budget
supplier is paid one month after delivery.
In addition, Halsey pays $2,000 Halsey Enterprises
per month for rent and $12,000 each month
for other expenditures.
NovemberTaxes December
are due in March
Januaryand amount to $10,000.
February MarchAs of
December 31, 1995 the company’s cash balance was $28,000; a minimum
balanceSales 130,000
of $25,000 must be125,000
maintained120,000 260,000
to meet bank’s 140,000
line of credit
Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They
Monthhave a policy
of Sale to repay short
(30%) term debt in78,000
36,000 any month its cash
42,000
balanceFirst
exceeds
Month the(50%)
minimum desired balance
62,500 of $25,000.
60,000 Prepare a cash
130,000
budget for Halsey.
2nd Month (20%) 26,000 25,000 24,000
Total Collections 124,500 163,000 196,000
 21
Cash Budget
Problem
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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
forPayments
other expenditures.
for Taxes Purchases
January 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.NovHalsey can Dec Jan
borrow short term from itsFeb
bank at a costMar
of 1/2% per
month. They have a policy to repay short term debt in any month its cash
balance
Sales exceeds
130,000 the125,000
minimum desired
120,000balance 260,000
of $25,000. Prepare
140,000a cash
budget for Halsey.
90,000
75% of January Sales Purchased in
November
 22
Cash Budget
Problem
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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
forPayments
other expenditures.
for Taxes Purchases
January 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.NovHalsey can Dec Jan
borrow short term from itsFeb
bank at a costMar
of 1/2% per
month. They have a policy to repay short term debt in any month its cash
balance
Sales exceeds
130,000 the125,000
minimum desired
120,000balance 260,000
of $25,000. Prepare
140,000a cash
budget for Halsey.
90,000
90,000 75% of January Sales Purchased in
November, Paid for in December
 23
Cash Budget
Problem-- Determine Material Purchases
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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 Determine January
are due in March andPayments
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
Cash Budgetto meet bank’s line of credit
agreement. Halsey can Halsey short term from its260,000x.75
borrow Enterprises bank at a cost of 1/2% per
month. They have a policy to repay short term debt in any month its cash
November
balance exceeds December
the minimum January
desired balance February March a cash
of $25,000. Prepare April
budget
Salesfor Halsey.
130,000 125,000 120,000 260,000 140,000 140,000
Purchases 195,000
Payments 195,000
 24
Cash Budget
Problem-- Determine Material Purchases
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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 Determine February
are due in March Payments
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
Cash Budgetto meet bank’s line of credit
agreement. Halsey can Halsey short term from its140,000x.75
borrow Enterprises bank at a cost of 1/2% per
month. They have a policy to repay short term debt in any month its cash
November
balance exceeds December
the minimum January
desired balance February March a cash
of $25,000. Prepare April
budget
Salesfor Halsey.
130,000 125,000 120,000 260,000 140,000 140,000
Purchases 195,000 105,000
Payments 195,000 105,000
 25
Cash Budget
Problem-- Determine Material Purchases
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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 Determine Marchand
are due in March Payments
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
Cash Budgetto meet bank’s line of credit
agreement. Halsey can Halsey short term from its140,000x.75
borrow Enterprises bank at a cost of 1/2% per
month. They have a policy to repay short term debt in any month its cash
November
balance exceeds December
the minimum January
desired balance February March a cash
of $25,000. Prepare April
budget
Salesfor Halsey.
130,000 125,000 120,000 260,000 140,000 140,000
Purchases 195,000 105,000 105,000
Payments 195,000 105,000 105,000
 26
Cash Budget
Problem-- Determine Material Purchases
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
January $120,000 March $140,000
February $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
Cash Budgetto meet bank’s line of credit
agreement. Halsey can Halsey
borrow Enterprises
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
November
balance exceeds December
the minimum January
desired balance February March a cash
of $25,000. Prepare April
budget
Salesfor Halsey.
130,000 125,000 120,000 260,000 140,000 140,000
Purchases 195,000 105,000 105,000
Payments 195,000 105,000 105,000
 27
Cash Budget
Problem-- Cash Inflows & Outflows
Cash Budget
Halsey Enterprises
January February March
Cash Collections 124,500 163,000 196,000
Material Payments 195,000 105,000 105,000

Summary of Previous Sheets

 28
Cash Budget
Problem-- Cash Inflows & Outflows
Cash Budget
Halsey Enterprises
January February March
Cash Collections 124,500 163,000 196,000
Material Payments 195,000 105,000 105,000
Other Payments:
Rent 2,000 2,000 2,000
Other Expenses 12,000 12,000 12,000
Tax Payments 0 0 10,000
Remaining Cash Outflows
 29
Cash Budget
Problem-- Cash Inflows & Outflows
Cash Budget
Halsey Enterprises
January February March
Cash Collections 124,500 163,000 196,000
Material Payments 195,000 105,000 105,000
Other Payments:
Rent 2,000 2,000 2,000
Other Expenses 12,000 12,000 12,000
Tax Payments 0 0 10,000
Net Monthly Change (84,500) 44,000 67,000
 30
Cash Budget
Problem-- Analysis of Borrowing Needs
Cash Budget
Halsey Enterprises
January February March
Net Monthly Change (84,500) 44,000 67,000
Beginning Cash Balance 28,000
Ending Cash (No Borrow)
Needed (Borrowing)
Loan Repayment
Interest Cost
Ending Cash Balance
Cumulative Borrowing
 31
Cash Budget
Problem-- Analysis of Borrowing Needs
Cash Budget
Halsey Enterprises
January February March
Net Monthly Change (84,500) 44,000 67,000
Beginning Cash Balance 28,000
Ending Cash (No Borrow) (56,500)
Needed (Borrowing)
Loan Repayment
Interest Cost
Ending Cash Balance
Cumulative Borrowing
 32
Cash Budget
Problem-- Analysis of Borrowing Needs
Cash Budget
Halsey Enterprises
January February March
Net Monthly Change (84,500) 44,000 67,000
Beginning Cash Balance 28,000
Ending Cash (No Borrow) (56,500)
Needed (Borrowing)
Loan Repayment Target Ending Balance
Interest Cost
Ending Cash Balance 25,000
Cumulative Borrowing
 33
Cash Budget
Problem-- Analysis of Borrowing Needs
Cash Budget
Halsey Enterprises
January February March
Net Monthly Change (84,500) 44,000 67,000
Beginning Cash Balance 28,000
Ending Cash (No Borrow) (56,500)
Needed (Borrowing) 81,500
Loan Repayment
Interest Cost
Borrowing Required to
Ending Cash Balance 25,000
cover Minimum Balance
Cumulative Borrowing
and Deficit
56,500+25,000
 34
Cash Budget
Problem-- Analysis of Borrowing Needs
Cash Budget
Halsey Enterprises
January February March
Net Monthly Change (84,500) 44,000 67,000
Beginning Cash Balance 28,000
Ending Cash (No Borrow) (56,500)
Needed (Borrowing) 81,500
Loan Repayment 0
Interest Cost 0
Ending Cash Balance 25,000
Cumulative Borrowing 81,500
 35
Cash Budget
Problem-- Analysis of Borrowing Needs
Cash Budget
Halsey Enterprises
January February March
Net Monthly Change (84,500) 44,000 67,000
Beginning Cash Balance 28,000 25,000
Ending Cash (No Borrow) (56,500) 69,000
Needed (Borrowing) 81,500
Loan Repayment 0
Interest Cost 0
Ending Cash Balance 25,000
Cumulative Borrowing 81,500
 36
Cash Budget
Problem-- Analysis of Borrowing Needs
Cash Budget
Halsey Enterprises
January February March
Net Monthly Change (84,500) 44,000 67,000
Beginning Cash Balance 28,000 25,000
Ending Cash (No Borrow) (56,500) 69,000
Needed (Borrowing) 81,500 0
Loan Repayment 0
Interest Cost 0
Ending Cash Balance 25,000 25,000
Cumulative Borrowing 81,500
Target Ending Balance
 37
Cash Budget
Problem-- Analysis of Borrowing Needs
Cash Budget
Halsey Enterprises
January February March
Net Monthly Change (84,500) 44,000 67,000
Beginning Cash Balance 28,000 25,000
Ending Cash (No Borrow) (56,500) 69,000
Needed (Borrowing) 81,500 0
Loan Repayment 0
Interest Cost 0 408
Ending Cash Balance 25,000 25,000
Cumulative Borrowing 81,500

Interest Incurred on Prior

Month Borrowing
81,500 x .005
 38
Cash Budget
Problem-- Analysis of Borrowing Needs
Cash Budget
Halsey Enterprises
January February March
Net Monthly Change (84,500) 44,000 67,000
Beginning Cash Balance 28,000 25,000
Ending Cash (No Borrow) (56,500) 69,000
Needed (Borrowing) 81,500 0
Loan Repayment 0 43,592
Interest Cost 0 408
Ending Cash Balance 25,000 25,000
Cumulative Borrowing 81,500

Amount that can be

repaid from monthly
surplus
69,000 - 408 - 25,000
 39
Cash Budget
Problem-- Analysis of Borrowing Needs
Cash Budget
Halsey Enterprises
January February March
Net Monthly Change (84,500) 44,000 67,000
Beginning Cash Balance 28,000 25,000
Ending Cash (No Borrow) (56,500) 69,000
Needed (Borrowing) 81,500 0
Loan Repayment 0 43,592
Interest Cost 0 408
Ending Cash Balance 25,000 25,000
Cumulative Borrowing 81,500 37,908

New Loan Balance

81,500 - 43,592
 40
Cash Budget
Problem-- Analysis of Borrowing Needs
Cash Budget
Halsey Enterprises
January February March
Net Monthly Change (84,500) 44,000 67,000
Beginning Cash Balance 28,000 25,000 25,000
Ending Cash (No Borrow) (56,500) 69,000 92,000
Needed (Borrowing) 81,500 0
Loan Repayment 0 43,592
Interest Cost 0 408
Ending Cash Balance 25,000 25,000
Cumulative Borrowing 81,500 37,908
 41
Cash Budget
Problem-- Analysis of Borrowing Needs
Cash Budget
Halsey Enterprises
January February March
Net Monthly Change (84,500) 44,000 67,000
Beginning Cash Balance 28,000 25,000 25,000
Ending Cash (No Borrow) (56,500) 69,000 92,000
Needed (Borrowing) 81,500 0 0
Loan Repayment 0 43,592
Interest Cost 0 408 190
Ending Cash Balance 25,000 25,000
Cumulative Borrowing 81,500 37,908

Interest Incurred on Prior

Month Borrowing
37,908 x .005
 42
Cash Budget
Problem-- Analysis of Borrowing Needs
Cash Budget
Halsey Enterprises
January February March
Net Monthly Change (84,500) 44,000 67,000
Beginning Cash Balance 28,000 25,000 25,000
Ending Cash (No Borrow) (56,500) 69,000 92,000
Needed (Borrowing) 81,500 0 0
Loan Repayment 0 43,592 37,908
Interest Cost 0 408 190
Ending Cash Balance 25,000 25,000
Cumulative Borrowing 81,500 37,908

Repay Outstanding Loan

Balance
 43
Cash Budget
Problem-- Analysis of Borrowing Needs
Cash Budget
Halsey Enterprises
January February March
Net Monthly Change (84,500) 44,000 67,000
Beginning Cash Balance 28,000 25,000 25,000
Ending Cash (No Borrow) (56,500) 69,000 92,000
Needed (Borrowing) 81,500 0 0
Loan Repayment 0 43,592 37,908
Interest Cost 0 408 190
Ending Cash Balance 25,000 25,000 53,902
Cumulative Borrowing 81,500 37,908 0

Ending Cash Balance

92,000-37,908-190
 44
Cash Budget
Problem-- Analysis of Borrowing Needs
Cash Budget
Halsey Enterprises
January February March
Net Monthly Change (84,500) 44,000 67,000
Beginning Cash Balance 28,000 25,000 25,000
Ending Cash (No Borrow) (56,500) 69,000 92,000
Needed (Borrowing) 81,500 0 0
Loan Repayment 0 43,592 37,908
Interest Cost 0 408 190
Ending Cash Balance 25,000 25,000 53,902
Cumulative Borrowing 81,500 37,908 0

Ending Cash Balance

$28,902 Surplus
 45
Cash Budget
Problem-- Analysis of Borrowing Needs
Cash Budget
Halsey Enterprises
January February March
Net Monthly Change (84,500) 44,000 67,000
Beginning Cash Balance 28,000 25,000 25,000
Ending Cash (No Borrow) (56,500) 69,000 92,000
Needed (Borrowing) 81,500 0 0
Loan Repayment 0 43,592 37,908
Interest Cost 0 408 190
Ending Cash Balance 25,000 25,000 53,902
Cumulative Borrowing 81,500 37,908 0

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