Kayak Co Budgeted Cash Receipts Excluding Cash 768372
Kayak Co Budgeted The Following Cash Receipts Excluding Cash Rece
Prepare monthly cash budgets for each of the first three months of next year, considering the company's budgeted cash receipts, disbursements, minimum cash balance requirements, borrowing arrangements, and repayment plans. Include calculations for cash receipts and payments, interest, and loan repayments, and determine the ending cash balances for each month.
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The goal of this analysis is to prepare comprehensive monthly cash budgets for Kayak Co. over the first quarter of the upcoming year, integrating existing financial constraints and borrowing arrangements. This exercise involves meticulously forecasting cash inflows and outflows, considering the company's stipulations regarding minimum cash balances, borrowing limits, interest rates, and repayment protocols. Such budgeting helps in ensuring adequate liquidity, avoiding cash shortages, and optimizing the use of available credit facilities.
In constructing these budgets, the initial cash balance stood at $30,000, with a loan balance of $60,000 at January 1. Understanding the company's borrowing capacity of up to $150,000 with an interest rate of 12% annually, payable monthly based on the beginning loan balance, is crucial. The company aims to maintain a minimum $30,000 cash balance at month-end, which guides the borrowing and repayment decisions.
The cash receipts for each month are given, excluding any cash from loans, and vary as follows: January $518,000, February $412,000, March $462,000. Disbursements are specified but exclude loan principal and interest payments, requiring careful tracking of borrowings to fund these outflows without violating the minimum cash balance rule.
In the month-by-month analysis, it is essential to calculate each month’s beginning cash balance, add cash receipts, subtract disbursements, debt service (interest and principal repayment), and adjust for any borrowing to sustain the minimum cash balance. Borrowings are capped at a maximum of $150,000, with repayments made from excess cash after meeting monthly obligations.
The detailed calculations involve computing interest on the beginning loan balance for each month, planning for principal repayments when cash allows, and ensuring the cash balance target is maintained. If cash receipts and disbursements do not meet thresholds, the company will need to borrow accordingly, respecting the maximum borrowing limit, and plan for principal reduction during months of surplus cash.
This cash flow planning exemplifies effective liquidity management, involving strategic borrowing, debt management, and adherence to banking covenants, ensuring the company can meet its financial commitments and operate smoothly throughout the period.
Overall, the preparation of these cash budgets provides a vital financial roadmap that supports operational planning, informs decision-making regarding financing needs, and helps to mitigate liquidity risks in the dynamic environment faced by Kayak Co.