Table 19-6

Dynamic Mattress's cash budget for 2007

(figures in $ millions)

A B C D E F
1 Quarter: First Second Third Fourth
2
3 A. Accounts Receivable
4 Receivables (beginning of period) 30.0 32.5 30.7 38.2
5 Sales 87.5 78.5 116.0 131.0
6 Collections
7 On sales in current period (80%) 70.0 62.8 92.8 104.8
8 On sales in previous period (20%)a 15.0 17.5 15.7 23.2
9 Total collections 85.0 80.3 108.5 128.0
10 Receivables (end of period) = Rows 4 + 5 - 9 32.5 30.7 38.2 41.2
11
12 B. Cash Budget
13 Sources of cash
14 Collections of acct receivable (row 9) 85.0 80.3 108.5 128.0
15 Other 1.5 0.0 12.5 0.0
16 Total sources 86.5 80.3 121.0 128.0
17 Uses of cash
18 Payments of accounts payable 65.0 60.0 55.0 50.0
19 Labor & other expenses 30.0 30.0 30.0 30.0
20 Capital expenses 32.5 1.3 5.5 8.0
21 Taxes, interest, and dividends 4.0 4.0 4.5 5.0
22 Total uses 131.5 95.3 95.0 93.0
23
24 Net cash inflow = Sources - Uses -45.0 -15.0 26.0 35.0
25
26 C. Short-term financing requirements
27 Cash at start of period 5.0 -40.0 -55.0 -29.0
28 + Net cash inflow (from row 24) -45.0 -15.0 26.0 35.0
29 = Cash at end of periodb -40.0 -55.0 -29.0 6.0
30 Minimum operating balance 5.0 5.0 5.0 5.0
31 Cumulative financing requiredc (Row 30 - 29) 45.0 60.0 34.0 -1.0
32
33
34
35
36 Notes:
37
a. Sales in the fourth quarter of the previous year were $75 million.
38
39 b. Firms cannot literally hold a negative amount of cash. This line shows the amount of cash the firm
40 will have to raise to pay its bills.
41
42 c. A negative sign indicates that no short-term financing is required. Instead the firm has a cash
43 surplus.
44
45
 A B C D E
1 Quarter: First Second Third Fourth
2
3 A. Accounts Receivable
4 Receivables (begin 30.0 32.5 30.7 38.2
5 Sales 87.5 78.5 116.0 131.0
6 Collections
7 On sales in curr 70.0 62.8 92.8 104.8
8 On sales in pre 15.0 17.5 15.7 23.2
9 Total collection 85.0 80.3 108.5 128.0
10 Receivables (end o 32.5 30.7 38.2 41.2
11
12 B. Cash Budget
13 Sources of cash
14 Collections of a 85.0 80.3 108.5 128.0
15 Other 1.5 0.0 12.5 0.0
16 Total sources 86.5 80.3 121.0 128.0
17 Uses
18 Payments of ac 65.0 60.0 55.0 50.0
19 Labor & other 30.0 30.0 30.0 30.0
20 Capital expense 32.5 1.3 5.5 8.0
21 Taxes, interest 4.0 4.0 4.5 5.0
22 Total uses 131.5 95.3 95.0 93.0
23
24 Net cash inflo -45.0 -15.0 26.0 35.0
25
26 C. Short-term financing requirements
27 Cash at start of p 5.0 -40.0 -55.0 -29.0
28 + Net cash inflow -45.0 -15.0 26.0 35.0
29 = Cash at end of pe -40.0 -55.0 -29.0 6.0
30 Minimum operati 5.0 5.0 5.0 5.0
31 Cumulative finan 45.0 60.0 34.0 -1.0
 Table 19-7
Dynamic Mattress's financing plan
(figures in $ millions)
A B C D E
1 Quarter: First Second Third Fourth
2 A. Cash requirements
3 Cash required for operationsa 45.00 15.00 -26.00 -35.00
4 Interest on bank loanb 0.00 0.80 0.80 0.63
5 Interest on stretched payablesc 0.00 0.00 0.79 0.00
6 Total cash required 45.00 15.80 -24.41 -34.37
7
8 B. Cash raised in quarter
9 Bank loan 40.00 0.00 0.00 0.00
10 Stretched payables 0.00 15.80 0.00 0.00
11 Securities sold 5.00 0.00 0.00 0.00
12 Total cash raised 45.00 15.80 0.00 0.00
13
14 C. Repayments
15 Of stretched payables 0.00 0.00 15.80 0.00
16 Of bank loan 0.00 0.00 8.61 31.39
17
18 D. Addition to cash balances 0.00 0.00 0.00 2.98
19
20 E. Bank loan
21 Beginning of quarter 0.00 40.00 40.00 31.39
22 End of quarter 40.00 40.00 31.39 0.00

Use notes from original Table 19.7, page 522

Solution to Self-Test 19.4
Quarter: First Second Third Fourth

Accounts Receivable (Table 19.6)

Receivables (beginning period) 30.0 35.0 31.4 46.4
Sales 87.5 78.5 116.0 131.0
Collections* 82.5 82.1 101.0 125.0
Receivables (end period) 35.0 31.4 46.4 52.4

Cash Budget (Table 19.7)

Sources of cash
Collections of Acct Receiv 82.5 82.1 101.0 125.0
Other 1.5 0.0 12.5 0.0
Total 84.0 82.1 113.5 125.0
Uses
Pmts of acct. payable 65.0 60.0 55.0 50.0
Labor & admin expenses 30.0 30.0 30.0 30.0
Capital expenses 32.5 1.3 5.5 8.0
Taxes, int, and dividends 4.0 4.0 4.5 5.0
Total uses 131.5 95.3 95.0 93.0
Net cash inflow -47.5 -13.2 18.5 32.0

Short-term financing requirements (Table 19.8)

Cash at start of period 5.0 -42.5 -55.7 -37.2
+ Net cash inflow -47.5 -13.2 18.5 32.0
= Cash at end of period -42.5 -55.7 -37.2 -5.2
Minimum operating balance 5.0 5.0 5.0 5.0
Cumul. ST financing required 47.5 60.7 42.2 10.2

* Sales in the fourth quarter of the previous year were $75 million.