Problem:
Susie's Cakes by Design expects sales of $100,000 during each of the next three months. It will make monthly purchases of $60,000 during this time. Wages and salaries are $10,000 per month plus 5% of the sales. Susie expects to make a tax payment of $20,000 the first month, a $15,000 purchase of fixed assets the second month, and to receive $8,000 in cash from the sale of an asset in the third month. All sales and purchases are for cash. Beginning cash and minimum cash balance are assumed to be zero.
There is some concern over the cash balances from month to month. Therefore, as the financial manager, it is your responsibility to prepare a cash budget for the next three months.
Also, briefly discuss your assessment of the cash flows and evaluate the cash needs of the company.