Week 4 Cost Accounting Assign
Review the appendix starting on page 206 in our textbook and the cash budget for Stylistic Furniture.
Theorize the following:
What changes could the company make if they wanted to maintain a cash balance of $650,000, rather than $350,000?
Unfortunaly we dont know much about this firm so it is hard to give specific ideas. Here are two tactics that most firms could try:
They could ask for a longer payment terms from their suppliers
They could as for a loan increase to help with their cash balances
What is the companys cost of borrowing was 6%, rather than 12%? What recommendations would you make to them?
The recommendations that I would make are that the cost of borrowing half means that more projects could be considered due to the capital would end up being substantially cheaper. If they are also borrowing the money at the beginning of the project and when the project is completed then I feel that if the payment could be completely made at the end of the project then they will not have debt holding over their heads at a huge interest rate and paying if quicklier will be cheaper for the company as well.
What is the company experienced 10% of bad debt per year? What would be the impact on their ending cash?
When it comes to the company experienced in 10% of bad debt per year the cash budget would ignore the estimated uncollectible sales. This is going to decrease the expected ending cash because of those sales that never resulted in the cash inflows for the company because of being uncollected so the company would have to write off as bad debt. If the balance are collected in