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