Asked by Katia Mejia on Jun 06, 2024
Verified
Building Blocks has a beginning cash balance for the quarter of $800. The firm's president requires a minimum cash balance of $800 be maintained at all times. Further, the president has a policy of borrowing when necessary to maintain that balance. If funds have been borrowed, then the president requires they be repaid as soon as excess funds are available. How much will the firm borrow or repay this quarter if the quarterly receipts are $2,565 and the quarterly disbursements are $2,607?
A) Borrow $42.
B) Borrow $38.
C) Neither borrow nor repay.
D) Repay $38.
E) Repay $42.
Quarterly Receipts
Refers to the income or revenue received by a business, organization, or government on a quarterly basis.
Quarterly Disbursements
The act of paying out or distributing company funds, typically dividends or investments, on a quarterly basis.
- Analyze the effects of cash flow movements and financing decisions on the firm's financial condition.
Verified Answer
BW
Brikarri WilliamsJun 09, 2024
Final Answer :
A
Explanation :
The firm will start with $800 and receive $2,565, totaling $3,365. After disbursements of $2,607, the firm will have $758, which is below the required $800 minimum. Therefore, the firm will need to borrow $42 to maintain the minimum balance.
Learning Objectives
- Analyze the effects of cash flow movements and financing decisions on the firm's financial condition.