Does it appear that ski''s target cash balance is appropriate

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Barnes's cash budget for the entire year, although not given here, is based heavily on his forecast for monthly sales. Sales are expected to be extremely low between May and September but then increase dramatically in the fall and winter. November is typically the firm's best month, when SKI ships equipment to retailers for the holiday season. Interestingly, Barnes's forecasted cash budget indicates that the company's cash holdings will exceed the targeted cash balance every month except for October and November, when shipments will be high but collections will not be coming in until later. Based on the ratios in Table IC 15-1, does it appear that SKI's target cash balance is appropriate?

In addition to possibly lowering the target cash balance, what actions might SKI take to better improve its cash management policies and how might that affect itsEVA?


Reference no: EM131106320

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