The Following Budget Estimates Have Been Prepared by Clifton Company

question 74

Essay

The following budget estimates have been prepared by Clifton Company: $\begin{array}{lcc} & \text { Cash Receipts } & \text { Cash Payments } \\\text { May } & £ 120,000 & £ 150,000 \\\text { June } & 110,300 & 150,000\end{array}$ The company likes to maintain a minimum cash balance of £40,000.
Any excess cash is invested in a money market account earning 9 per cent compounded monthly. Interest is reinvested in the money market account. Any cash deficiencies are covered by a withdrawal from the money market account. If additional cash is needed, the company has a line of credit at 12 per cent interest with the local bank. Interest is paid monthly.
Assume a cash balance on May 1 of £40,000, a money market account balance of £0, and a credit line loan balance of £0.

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Definitions:

Per Capita Income

The average income earned per person in a given area in a specified year, often used to gauge the economic prosperity of a population.

Tariff Barriers

Taxes imposed on imported goods to protect domestic industries from foreign competition and raise government revenue.

Exploiting

Taking unfair advantage of a person, group, or situation for one's own benefit, often ethically or legally questionable.

Middle-Income DVCs

Developing countries that have achieved a certain level of GDP per capita, falling between low-income and high-income thresholds, if DVCs is taken to mean Developing Countries.