A contractor's monthly cash flow projection shows beginning cash of $85,000, receipts of $240,000, and disbursements of $290,000. If the minimum cash balance required is $50,000, what action is needed?
Correct Answer
C) Arrange for $15,000 in additional financing
Ending cash = Beginning cash + Receipts - Disbursements = $85,000 + $240,000 - $290,000 = $35,000. Since this is below the $50,000 minimum, additional financing of $15,000 is needed ($50,000 - $35,000).
Why This Is the Correct Answer
Ending cash = Beginning cash + Receipts - Disbursements = $85,000 + $240,000 - $290,000 = $35,000. Since this is below the $50,000 minimum, additional financing of $15,000 is needed ($50,000 - $35,000).
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