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Camp and Fevurly Financial Planners Have Forecasted Revenues For The

Camp and Fevurly Financial Planners forecasted revenues for the first six months of 2012. They created a cash budget and determined the minimum line of credit needed would be $30,000 to maintain a $10,000 cash balance. They also modeled best, base, and worst case revenue scenarios that showed the maximum borrowing needed would be $40,000 to stay above the minimum in all cases.

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Taimour Hassan
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342 views1 page

Camp and Fevurly Financial Planners Have Forecasted Revenues For The

Camp and Fevurly Financial Planners forecasted revenues for the first six months of 2012. They created a cash budget and determined the minimum line of credit needed would be $30,000 to maintain a $10,000 cash balance. They also modeled best, base, and worst case revenue scenarios that showed the maximum borrowing needed would be $40,000 to stay above the minimum in all cases.

Uploaded by

Taimour Hassan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Camp and Fevurly Financial Planners have forecasted

revenues for the #3493


Camp and Fevurly Financial Planners have forecasted revenues for the first six months of 2012,
as shown in the following table.Month..................... Revenue.................. Month..................
RevenueNovember 2011........... $48,000................... March....................
30,000December................... 45,000..................... April................... 38,000January
2012............... 25,000...................... May................... 40,000February.....................
27,000...................... June................... 45,000The firm collects 60% of its sales immediately,
39% one month after the sale, and 1% are written off as bad debts two months after the sale.
The firm assumes that wages and benefits paid to clerical personnel will be $7,000 per month
while commissions to sales associates average 25% of collectable sales. Each of the two
partners is paid $5,000 per month or 20% of net sales, whichever is greater. Commissions and
partner salaries are paid one month after the revenue is earned. Rent expense for their office
space is $3,500 per month, and lease expense for office equipment is $800. Utilities average
$250 per month, except in May and June when they average only $150. The ending cash
balance in December 2011 was $12,000.a. Create a cash budget for January to June 2012, and
determine the firm's ending cash balance in each month assuming that the partners wish to
maintain a minimum cash balance of $10,000.b. Camp and Fevurly are thinking of obtaining a
line of credit from their bank. Based on their expectations for the first six months of the year,
what is the minimum amount that would be necessary? Round your answer to the next highest
$1,000 and ignore interest charges on short-term debt. Look up the ROUNDUP function in the
online help.c. Create three scenarios (best case, base case, and worst case) assuming that
revenues are 10% better than expected, exactly as expected, or 10% worse than expected.
What is the maximum that the firm would need to borrow to maintain its minimum cash balance
in all three cases? Use the Scenario Manager and create a summary of your results. Would this
change your answer in part b?View Solution:
Camp and Fevurly Financial Planners have forecasted revenues for the

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