Finance Cash Budget

In: Business and Management

Submitted By eryneryanna
Words 1178
Pages 5
QUESTION 1 ( MARKS )

Compensation balances are frequently a part of revolving lending arrangements with banks, yet they add to the cost of financing for the borrower. Why, then, borrowers agree to such terms? What other types of alternative financing are available?

The borrowers agree to such terms because they use the compensating balance to pay for non credit bank sources such as cash management services must major firms have now negotiated for banks to use the corporations collected funds for compensation and use fees to cover any short fall. The other types of alternative financing that available is letters of credit that common arrangement in International Finance, account receivable financing, a secured short-term loan that involks either the assignment or the factoring of receivables. Inventory loan, a secured short-term loan to purchase inventory.

QUESTION 2 (15 MARKS)

KKRE Company is producing customized cardboard boxes in a variety of sizes for different customers. The company currently has a cash balance of RM 8,000 and it plans to purchase a new machinery in the next month (November) at a cost of RM 50,000. In order to take advantage of the discount offered, purchasing of the machinery will be made in cash. KKRE maintains a minimum cash balance of RM 6,000 for unforeseen contingencies. Following is the information regarding company’ projected sales.

| |August |September |October |November |December |
| |RM |Rm |Rm |Rm |Rm |
|sales |60,000 |85,000 |70,000 |90,000 |120,000 |

Meanwhile, the policy on sales to customers and purchased to suppliers are as follows :…...

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