Question

At the beginning of the year, opal company has a cash balance of $23,000. During the year, the company expects cash disbursements of $160,000, and cash receipts of $140,000. If opal company requires an ending cash balance of $20,000, how much must the company borrow?.

Answer 1

In the above case, if the opal company has a cash balance of $23,000 and the company expects an ending cash balance of $20,000, then the company should borrow $17,000.

What do you mean by Cash?

Cash refers to the legal tender that must be used for exchanging goods, services, or debt.

In other words, it refers to the money that is a reliable form of payment and an accepted form in businesses.

Calculating cash that must be borrowed by a company.

$\begin{aligned}\text{Total available cash}&=\text{Beginning cash balance+ Cash receipts}\\&=\ 23,000+\ 140,000\\&=\ 163,000\end{aligned}$

$\begin{aligned}\text{Borrowings}&=\text{Total available cash-Cash disbursements- Ending cash balance}\\\\&=\ 163,000-\ 160,000-\ 20,000\\&=\ 17,000\end{aligned}$

So, (17,000) is required by the company to borrow.

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