Asked by Annisa Rahma Putri on May 19, 2024
Verified
Sparks Corporation has a cash balance of $17,700 on April 1. The company must maintain a minimum cash balance of $14,500. During April, expected cash receipts are $65,000. Cash disbursements during the month are expected to total $77,500. Ignoring interest payments, during April the company will need to borrow:
A) $9,300
B) $5,200
C) $14,500
D) $12,500
Cash Balance
The amount of cash held by a company at a given point in time.
Minimum Cash Balance
The lowest amount of cash that a company aims to hold in its bank accounts at any time to meet routine operational expenses.
Cash Receipts
Money received by a business, including payments from customers, cash sales, and other sources of income.
- Build capabilities in crafting a cash budget and overseeing cash flow management, entailing the forecasting of cash receipts and expenditures.
Verified Answer
TB
Tamahene Benavidez
May 24, 2024
Final Answer :
A
Explanation :
The company starts with $17,700, expects to receive $65,000, and plans to spend $77,500. So, the net cash flow is $17,700 + $65,000 - $77,500 = $5,200. To maintain a minimum balance of $14,500, they need $14,500 - $5,200 = $9,300.
Learning Objectives
- Build capabilities in crafting a cash budget and overseeing cash flow management, entailing the forecasting of cash receipts and expenditures.
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