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Question 8. Little Louie’s expects to have $100 in cash on hand at the beginning of...

Question 8. Little Louie’s expects to have $100 in cash on hand at the beginning of June, and the company's target cash balance is $100. Net cash flow for June is minus $300. Assuming that Little Louie’s borrows to meet short‑term cash needs and pays back as soon as surplus cash is available, what will be the company's ending cash balance after financing at the end of June?

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Answer #1

Beginning Cash Balance = $100
Target Cash Balance = $100
Net Cash Flow = -$300

Ending Cash balance before financing = Beginning Cash Balance + Net Cash Flow
Ending Cash balance before financing = $100 + (-$300)
Ending Cash balance before financing = -$200

Required Financing = Target Cash Balance - Ending Cash balance before financing
Required Financing = $100 - (-$200)
Required Financing = $300

Ending Cash Balance after financing = Ending Cash balance before financing + Required Financing
Ending Cash Balance after financing = -$200 + $300
Ending Cash Balance after financing = $100

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