Southern Company is preparing a cash budget for April. The company has $12,000 c

Question

Southern Company is preparing a cash budget for April. The company has $12,000 cash at the beginning of April and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during April. Southern Company has an agreement with its bank to maintain a cash balance of at least $10,000. To maintain the $10,000 required balance, during April the company must: a. borrow $2,500. b. borrow $7,500. c. borrow $5,000. d. borrow $4,500. Southern Company is preparing a cash budget for April. The company has $12,000 cash at the beginning of April and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during April. Southern Company has an agreement with its bank to maintain a cash balance of at least $10,000. To maintain the $10,000 required balance, during April the company must: a. borrow $2,500. b. borrow $7,500. c. borrow $5,000. d. borrow $4,500.

Explanation / Answer

Hi,

Please find the answer as follows:

Net Cash Balance at the end of month = 12000 + 30000 - 34500 = 7500

Minimum Balance Required = 10000

Borrowing = 10000 - 7500 = 2500

Option A is correct.

Thanks.

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