• March 2nd, 2016


Paper, Order, or Assignment Requirements

Note:  Work must be completed by hand.  No Excel spreadsheets will be accepted.


  1. BeachTop Boats, Inc. is planning to request an increase in its bank line of credit. In anticipation of meeting with the bank, the firm’s CFO has asked you to complete a cash budget for the first four months of the year using the following assumptions: (21 points)


Month Sales Purchases
November (actual) $13,450 $3,500
December (actual) $13,025 $4,000
January (forecast) $12,950 $4,500
February (forecast) $14,800 $5,000
March (forecast) $16,650 $5,500
April (forecast) $18,500 $6,000
May (forecast) $16,250 $6,500


  • BeachTop collects 10 percent of each month’s sales in cash, 50 percent one month later, and 37 percent the second month after the sale. Examination shows that 3 percent of sales are uncollectible.
  • One-half of the purchases each month are made on payment terms of 2/10, net 30. That means a 2 percent discount is allowed when payment is made in the same month as the purchase.  The remaining purchases are made on payment terms of net 60.
  • Beachtop manufactures batteries one month ahead of the expected sales date (i.e., batteries expected to be sold in January are manufactured in December). Production costs are 30 percent of sales.
  • Sales and marketing expenses are 20 percent of sales each month.
  • Interest expense is expected to be $3,000 for the year, and will be paid in twelve monthly installments.
  • Lease obligations amount to $3,500 per month, and the firm estimates miscellaneous expenses to be $750 per month. Fixed assets are currently being depreciated by $1,250 per month.
  • Income tax payments are expected to total $21,000 and will be paid in four installments in April, June, September, and December.
  • Assume beginning cash in January is $57,500, and the firm needs to maintain a minimum balance of $50,000. How much additional funding should the firm request, and why?



  1. What is the sustainable growth rate (SGR)? Why is it important for a firm to know its SGR? (4 points)


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