Construct a short-term financial plan for Springfield Snowboards based on its ex
ID: 2571384 • Letter: C
Question
Construct a short-term financial plan for Springfield Snowboards based on its expansion opportunity described in the "Positive Cash Flow Shocks". Base the plan on the following table, which forecasts additional capital expenditures, marketing (SG&A), and working capital in Q1 and Q2 along with higher sales in Q2–Q4.Starting cash balance 2013 Q1 is $1040 in cash and that its bank will offer it a short-term loan at the rate 1.75% per quarter. Assume that the minimum cash balance to be maintained is $510
Cash Balance and Short-Term Financing ($000) 201301 201302 201303 201304 Starting Cash Balance Change in Cash and Equivalents Minimum Cash Balance Surplus (Deficit) Relative to Minimum Increase (Decrease) in Short-Term Financing Existing Short-term Financing Total Short-term Financing Ending Cash Balance S (Select the best choice below.) O A. They will need to borrow $300,000 for the third quarter of 2013, and they will pay back the loan during O B. They will need to borrow $300,000 for the first quarter of 2013, and they will pay back the loan during O C. They will need to borrow 5300,000 for the second quarter of 2013, and they will pay back the loan O D. They will need to borrow $300,000 for the first quarter of 2013, and they will pay back the loan during Q4 of 2013. Q2 of 2013. during Q3 of 2013. Q4 of 2013.Explanation / Answer
Choice B is correct, they will need to borrow $300,000 for the first quarter of 2013 and they will pay back the loan during Q2 of 2013 2013 Q1 2013 Q2 2013 Q3 2013 Q4 Starting Cash Balance 1,040.00 510.00 658.75 1,354.75 Change in the Cash and Equivalents (830.00) 454.00 696.00 669.00 Interest on Loan @1.75% per qtr (5.25) Minimum Cash Balance (510.00) (510.00) (510.00) (510.00) Surplus/(Defecit) Relative to Minimum (300.00) 448.75 844.75 1,513.75 Increase/(Decrease) in short term financing 300.00 (300.00) - - Existing Short term financing - 300.00 - - Total Short term Financing 300.00 - - - Ending Cash Balance 510.00 658.75 1,354.75 2,023.75