Letestu company has a beginning cash balance on january 1, 2011 of $10,000. cash collected in january is $100,000 and sales revenue in january is $108,000. expected disbursements for january for inventory purchases are $45,000 and for selling and administrative expenses are $62,000. additionally, a dividend payment of $5,000 will be made in january. letestu maintains a minimum cash balance of $5,000. how much cash will letestu need to borrow in january in order to meet the minimum balance requirement?

Cash will Letestu need to borrow in January in order to meet the minimum balance requirement is $7,000

Explanation:

Cash inflows in January = Cash collected in January = $100,000

Cash outflows in January = Cash paid for inventory purchases + Cash paid for selling and administrative expenses + Dividend payment = $45,000 + $62,000 + $5,000 = $112,000

Without borrowing, Cash balance on January 31, 2011 = $10,000 + $100,000 - $112,000 = -$2,000

Letestu maintains a minimum cash balance of $5,000

Cash will Letestu need to borrow in January = $5,000 + $2,000 = $7,000

answer; ( prices are sticky);

the correct answer is:

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