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 Cash Budget Problem Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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$120,000March $140,000 February$260,000April$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 Budget Problem Collection of January Sales Nov Dec Jan Feb Mar Sales 130, , , , ,000 36, ,000x.30

4 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem Collection of January Sales Nov Dec Jan Feb Mar Sales 130, , , , ,000 36, ,000x.30 60, ,000x.50

5 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem Collection of January Sales Nov Dec Jan Feb Mar Sales 130, , , , ,000 36, ,000x.30 60,00024, ,000x ,000x.20

6 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem-- Determine Collections Cash Budget Halsey Enterprises November December January FebruaryMarch Sales130,000125,000120,000260,000140,000 Collections: Month of Sale (30%)36,000 First Month (50%) 2nd Month (20%) Total Collections 120,000x.30 Determine January Collections

7 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem-- Determine Collections Cash Budget Halsey Enterprises November December January FebruaryMarch Sales130,000125,000120,000260,000140,000 Collections: Month of Sale (30%)36,000 First Month (50%)62,500 2nd Month (20%) Total Collections 125,000x.50 Determine January Collections

8 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem-- Determine Collections Cash Budget Halsey Enterprises November December January FebruaryMarch Sales130,000125,000120,000260,000140,000 Collections: Month of Sale (30%)36,000 First Month (50%)62,500 2nd Month (20%)26,000 Total Collections 130,000x.20 Determine January Collections

9 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem-- Determine Collections Cash Budget Halsey Enterprises November December January FebruaryMarch Sales130,000125,000120,000260,000140,000 Collections: Month of Sale (30%)36,000 First Month (50%)62,500 2nd Month (20%)26,000 Total Collections124,500 Determine January Collections

10 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem-- Determine Collections Cash Budget Halsey Enterprises November December January FebruaryMarch Sales130,000125,000120,000260,000140,000 Collections: Month of Sale (30%)36,00078,000 First Month (50%)62,500 2nd Month (20%)26,000 Total Collections124, ,000x.30 Determine February Collections

11 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem-- Determine Collections Cash Budget Halsey Enterprises November December January FebruaryMarch Sales130,000125,000120,000260,000140,000 Collections: Month of Sale (30%)36,00078,000 First Month (50%)62,50060,000 2nd Month (20%)26,000 Total Collections124, ,000x.50 Determine February Collections

12 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem-- Determine Collections Cash Budget Halsey Enterprises November December January FebruaryMarch Sales130,000125,000120,000260,000140,000 Collections: Month of Sale (30%)36,00078,000 First Month (50%)62,50060,000 2nd Month (20%)26,00025,000 Total Collections124, ,000x.20 Determine February Collections

13 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem-- Determine Collections Cash Budget Halsey Enterprises November December January FebruaryMarch Sales130,000125,000120,000260,000140,000 Collections: Month of Sale (30%)36,00078,000 First Month (50%)62,50060,000 2nd Month (20%)26,00025,000 Total Collections124,500163,000 Determine February Collections

14 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem-- Determine Collections Cash Budget Halsey Enterprises November December January FebruaryMarch Sales130,000125,000120,000260, ,000 Collections: Month of Sale (30%)36,00078,000 42,000 First Month (50%)62,50060,000 2nd Month (20%)26,00025,000 Total Collections124,500163, ,000x.30 Determine March Collections

15 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem-- Determine Collections Cash Budget Halsey Enterprises November December January FebruaryMarch Sales130,000125,000120,000260, ,000 Collections: Month of Sale (30%)36,00078,000 42,000 First Month (50%)62,500 60, ,000 2nd Month (20%)26,00025,000 Total Collections124,500163, ,000x.50 Determine March Collections

16 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem-- Determine Collections Cash Budget Halsey Enterprises November December January FebruaryMarch Sales130,000125,000120,000260, ,000 Collections: Month of Sale (30%)36,00078,000 42,000 First Month (50%)62,50060, ,000 2nd Month (20%)26,00025,000 24,000 Total Collections124,500163, ,000x.20 Determine March Collections

17 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem-- Determine Collections Cash Budget Halsey Enterprises November December January FebruaryMarch Sales130,000125,000120,000260, ,000 Collections: Month of Sale (30%)36,00078,000 42,000 First Month (50%)62,50060, ,000 2nd Month (20%)26,00025,000 24,000 Total Collections124,500163, ,000

18 Cash Budget Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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. Problem Payments for January Purchases Nov Dec Jan Feb Mar Sales 130, , , , ,000 90,000 75% of January Sales Purchased in November

19 Cash Budget Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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. Problem Payments for January Purchases Nov Dec Jan Feb Mar Sales 130, , , , ,000 90,000 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$120,000March $140,000 February$260,000April$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 Budget Problem-- Determine Material Purchases Cash Budget Halsey Enterprises Sales130,000125,000120,000260,000140,000140,000 Purchases195,000 Payments195,000 November December January FebruaryMarch April 260,000x.75 Determine January Payments

21 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem-- Determine Material Purchases Cash Budget Halsey Enterprises Sales130,000125,000120,000260,000140,000140,000 Purchases195,000105,000 Payments195,000105,000 November December January FebruaryMarch April 140,000x.75 Determine February Payments

22 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem-- Determine Material Purchases Cash Budget Halsey Enterprises Sales130,000125,000120,000260,000140,000140,000 Purchases195,000105,000105,000 Payments195,000105,000105,000 November December January FebruaryMarch April 140,000x.75 Determine March Payments

23 Halsey Enterprises has projected its sales for the first four months of 1996 as follows: January$120,000March $140,000 February$260,000April$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 Budget Problem-- Determine Material Purchases Cash Budget Halsey Enterprises Sales130,000125,000120,000260,000140,000140,000 Purchases195,000105,000105,000 Payments195,000105,000105,000 November December January FebruaryMarch April

24 Cash Budget Problem-- Cash Inflows & Outflows Cash Budget Halsey Enterprises Cash Collections 124,500163, ,000 Material Payments 195,000105, ,000 January FebruaryMarch Summary of Previous Sheets

25 Cash Budget Problem-- Cash Inflows & Outflows Cash Budget Halsey Enterprises Cash Collections 124,500163, ,000 Material Payments 195,000105, ,000 Other Payments: Rent 2,0002,000 2,000 Other Expenses 12,00012,000 12,000 Tax Payments00 10,000 January FebruaryMarch Remaining Cash Outflows

26 Cash Budget Problem-- Cash Inflows & Outflows Cash Budget Halsey Enterprises Cash Collections 124,500163, ,000 Material Payments 195,000105, ,000 Other Payments: Rent 2,0002,000 2,000 Other Expenses 12,00012,000 12,000 Tax Payments 00 10,000 Net Monthly Change(84,500)44,000 67,000 January FebruaryMarch

27 Cash Budget Problem-- Analysis of Borrowing Needs Cash Budget Halsey Enterprises Net Monthly Change(84,500)44,000 67,000 Beginning Cash Balance28,000 Ending Cash (No Borrow) Needed (Borrowing) Loan Repayment Interest Cost Ending Cash Balance Cumulative Borrowing January FebruaryMarch

28 Cash Budget Problem-- Analysis of Borrowing Needs Cash Budget Halsey Enterprises Net Monthly Change(84,500)44,000 67,000 Beginning Cash Balance28,000 Ending Cash (No Borrow)(56,500) Needed (Borrowing) Loan Repayment Interest Cost Ending Cash Balance Cumulative Borrowing January FebruaryMarch

29 Cash Budget Problem-- Analysis of Borrowing Needs Cash Budget Halsey Enterprises Net Monthly Change(84,500)44,000 67,000 Beginning Cash Balance28,000 Ending Cash (No Borrow)(56,500) Needed (Borrowing) Loan Repayment Interest Cost Ending Cash Balance25,000 Cumulative Borrowing January FebruaryMarch Target Ending Balance

30 Cash Budget Problem-- Analysis of Borrowing Needs Cash Budget Halsey Enterprises Net Monthly Change(84,500)44,000 67,000 Beginning Cash Balance28,000 Ending Cash (No Borrow)(56,500) Needed (Borrowing)81,500 Loan Repayment Interest Cost Ending Cash Balance25,000 Cumulative Borrowing January FebruaryMarch Borrowing Required to cover Minimum Balance and Deficit 56,500+25,000

31 Cash Budget Problem-- Analysis of Borrowing Needs Cash Budget Halsey Enterprises Net Monthly Change(84,500)44,000 67,000 Beginning Cash Balance28,000 Ending Cash (No Borrow)(56,500) Needed (Borrowing)81,500 Loan Repayment0 Interest Cost0 Ending Cash Balance25,000 Cumulative Borrowing81,500 January FebruaryMarch

32 Cash Budget Problem-- Analysis of Borrowing Needs Cash Budget Halsey Enterprises Net Monthly Change(84,500)44,000 67,000 Beginning Cash Balance28,00025,000 Ending Cash (No Borrow)(56,500)69,000 Needed (Borrowing)81,500 Loan Repayment0 Interest Cost0 Ending Cash Balance25,000 Cumulative Borrowing81,500 January FebruaryMarch

33 Cash Budget Problem-- Analysis of Borrowing Needs Cash Budget Halsey Enterprises Net Monthly Change(84,500)44,000 67,000 Beginning Cash Balance28,00025,000 Ending Cash (No Borrow)(56,500)69,000 Needed (Borrowing)81,5000 Loan Repayment0 Interest Cost0 Ending Cash Balance25,00025,000 Cumulative Borrowing81,500 January FebruaryMarch Target Ending Balance

34 Cash Budget Problem-- Analysis of Borrowing Needs Cash Budget Halsey Enterprises Net Monthly Change(84,500)44,000 67,000 Beginning Cash Balance28,00025,000 Ending Cash (No Borrow)(56,500)69,000 Needed (Borrowing)81,5000 Loan Repayment0 Interest Cost0408 Ending Cash Balance25,00025,000 Cumulative Borrowing81,500 January FebruaryMarch Interest Incurred on Prior Month Borrowing Interest Incurred on Prior Month Borrowing 81,500 x.005

35 Cash Budget Problem-- Analysis of Borrowing Needs Cash Budget Halsey Enterprises Net Monthly Change(84,500)44,000 67,000 Beginning Cash Balance28,00025,000 Ending Cash (No Borrow)(56,500)69,000 Needed (Borrowing)81,5000 Loan Repayment043,592 Interest Cost0408 Ending Cash Balance25,00025,000 Cumulative Borrowing81,500 January FebruaryMarch Amount that can be repaid from monthly surplus 69, ,000

36 Cash Budget Problem-- Analysis of Borrowing Needs Cash Budget Halsey Enterprises Net Monthly Change(84,500)44,000 67,000 Beginning Cash Balance28,00025,000 Ending Cash (No Borrow)(56,500)69,000 Needed (Borrowing)81,5000 Loan Repayment043,592 Interest Cost0408 Ending Cash Balance25,00025,000 Cumulative Borrowing81,50037,908 January FebruaryMarch New Loan Balance 81, ,592

37 Cash Budget Problem-- Analysis of Borrowing Needs Cash Budget Halsey Enterprises Net Monthly Change(84,500)44,000 67,000 Beginning Cash Balance28,00025,000 25,000 Ending Cash (No Borrow)(56,500)69,000 92,000 Needed (Borrowing)81,5000 Loan Repayment043,592 Interest Cost0408 Ending Cash Balance25,00025,000 Cumulative Borrowing81,50037,908 January FebruaryMarch

38 Cash Budget Problem-- Analysis of Borrowing Needs Cash Budget Halsey Enterprises Net Monthly Change(84,500)44,000 67,000 Beginning Cash Balance28,00025,000 25,000 Ending Cash (No Borrow)(56,500)69,000 92,000 Needed (Borrowing)81, Loan Repayment043,592 Interest Cost Ending Cash Balance25,00025,000 Cumulative Borrowing81,50037,908 January FebruaryMarch Interest Incurred on Prior Month Borrowing Interest Incurred on Prior Month Borrowing 37,908 x.005

39 Cash Budget Problem-- Analysis of Borrowing Needs Cash Budget Halsey Enterprises Net Monthly Change(84,500)44,000 67,000 Beginning Cash Balance28,00025,000 25,000 Ending Cash (No Borrow)(56,500)69,000 92,000 Needed (Borrowing)81, Loan Repayment043,592 37,908 Interest Cost Ending Cash Balance25,00025,000 Cumulative Borrowing81,50037,908 January FebruaryMarch Repay Outstanding Loan Balance

40 Cash Budget Problem-- Analysis of Borrowing Needs Cash Budget Halsey Enterprises Net Monthly Change(84,500)44,000 67,000 Beginning Cash Balance28,00025,000 25,000 Ending Cash (No Borrow)(56,500)69,000 92,000 Needed (Borrowing)81, Loan Repayment043,592 37,908 Interest Cost Ending Cash Balance25,00025,000 53,902 Cumulative Borrowing81,50037,908 0 January FebruaryMarch Ending Cash Balance 92,000-37,

41 Cash Budget Problem-- Analysis of Borrowing Needs Cash Budget Halsey Enterprises Net Monthly Change(84,500)44,000 67,000 Beginning Cash Balance28,00025,000 25,000 Ending Cash (No Borrow)(56,500)69,000 92,000 Needed (Borrowing)81, Loan Repayment043,592 37,908 Interest Cost Ending Cash Balance25,00025,000 53,902 Cumulative Borrowing81,50037,908 0 January FebruaryMarch Ending Cash Balance $28,902 Surplus

42 Cash Budget Problem-- Analysis of Borrowing Needs Cash Budget Halsey Enterprises Net Monthly Change(84,500)44,000 67,000 Beginning Cash Balance28,00025,000 25,000 Ending Cash (No Borrow)(56,500)69,000 92,000 Needed (Borrowing)81, Loan Repayment043,592 37,908 Interest Cost Ending Cash Balance25,00025,000 53,902 Cumulative Borrowing81,50037,908 0 January FebruaryMarch 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