Reference no: EM132490385
Criterias below are on the financial statement of RAM Inc on 31st December of the first fisscal year.
Cash $80,000
Payable 130,000
Receviable 150,000
Note payable 35,000
Inventory 65,000
Tax payable 20,800
Fixed asset 200,000
Equity 200,000
Accumulated depreciation 45,800
Additional information below is used for the first fiscal year.
Sales $800,000
Depreciation 25,000
Cost of good sold (consisting of depreciation) 520,000
Net income 20,000
Revenue 350,000
RAM Inc expected that sales will increase by 10% in the next fiscal year. All income and corresponding expenses are also expected to rise 10% in coming year, except that depreciation is constant. All expenses are paid in cash during the year. It is predicted that inventory at the end of the second year has a value of $150.000 At the same time, balance of note payable is $50.000 and have no tax. The company will retain the minimum cash balance of 50.000$.
Requirements:
Considering each situation seperately and only focusing on changes described.
(Suggestion: prepare to analyze the demand for cash (cash forecast) in the second fiscal year, and then to caculate the effect of each situation in 3 situations which are free to choose.
Question a. RAM Inc is considering to change its credit policy. This change forecasts the final amount of receviable for 90 days of revenue. According to changes, how would RAM's cash status be affacted? Maybe a company need to borrow more money?
Question b. RAM is considering to adjust day's sales in receivables up to 120 days based on the final amount of receivable. According to changes, how would RAM's cash status be affacted?
Question c. Suppliers are intended to change the credit policy to RAM. The company must have pay suppliers money for purchases within 60 days and day's sales in receivables is not changed. According to changes, how would RAM's cash status be affacted?
Check: (a) cash balance, $33,500
(b)a demand for cash, $46,000