Asked by J. Michael Berner on Jun 24, 2024
Verified
The Corner Store has a beginning cash balance for the quarter of $1,240. The store has a policy of maintaining a minimum cash balance of $1,000 and is willing to borrow funds as needed to maintain that balance. How much will the store have to borrow if the net cash flow for the quarter is - $370?
A) $0
B) $130
C) $240
D) $320
E) $370
Minimum Cash Balance
The least amount of cash a company maintains on hand to meet immediate operational expenses.
Net Cash Flow
The overall flow of currency into and out of an enterprise, critically influencing its liquid assets.
Borrow
Borrow refers to the act of receiving something with the intention to return it, often with interest in the case of financial borrowing.
- Gain insight into the management of cash flows, which includes money coming in from sales and money going out for expenses.
- Assess the impact of borrowing and repaying loans on the cash balance of a company.
Verified Answer
ZK
Zybrea KnightJul 01, 2024
Final Answer :
B
Explanation :
The store starts with $1,240 and has a net cash flow of -$370, leaving it with $870 ($1,240 - $370). To maintain a minimum balance of $1,000, the store needs to borrow $130 ($1,000 - $870).
Learning Objectives
- Gain insight into the management of cash flows, which includes money coming in from sales and money going out for expenses.
- Assess the impact of borrowing and repaying loans on the cash balance of a company.