Questions: If projected net cash flow for January is ( 6,500); beginning cash balance is 16,000; minimum cash balance is 5,000; beginning loan balance is 4,500, what will be the cash balance on the pro forma cash budget at the end of January? Multiple Choice 5,000 10,000 12,000 4,500

Solution Steps

To find the cash balance at the end of January, we need to calculate the ending cash balance by adding the beginning cash balance to the projected net cash flow. If the resulting cash balance is below the minimum cash balance, we need to consider the loan balance to cover the shortfall.

To find the ending cash balance, we start with the beginning cash balance and add the projected net cash flow:

\[ \text{Ending Cash Balance} = \text{Beginning Cash Balance} + \text{Projected Net Cash Flow} \]

Substituting the given values:

\[ \text{Ending Cash Balance} = 16000 + (-6500) = 9500 \]

Next, we compare the calculated ending cash balance with the minimum cash balance requirement. The minimum cash balance is \(5000\).

Since \(9500 \geq 5000\), the ending cash balance is above the minimum cash balance, and no additional loan is needed.

Final Answer