AAA Company Is Preparing Its 3rd Quarter Budget and Provides

question 139

Multiple Choice

AAA Company is preparing its 3rd quarter budget and provides the following data: Cash balance at June 30 is projected to be $4,000. The company is required to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and pays interest monthly at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. Loan balance should be repaid in increments of $5,000 when there is surplus cash.
What is the projected cash shortfall at the end of August, before financing transactions have been taken into consideration?

• A)$0
• B)$5,000
• C)$3.000
• D)$8,000

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Definitions:

Prices of Products

The cost at which goods or services are offered for sale to consumers.

Consumer's Budget

The total amount of income available to an individual or household for spending and saving after taxes have been accounted for.

Indifference Curves

Visual diagrams in microeconomics that display the mix of two products which provide the same level of pleasure and usefulness to a purchaser.