Questions (found on the Question Set tab of Assignment #11 Excel spreadsheet):

1. Based on the monthly cash budget, what is the maximum loan balance for January? Based on the daily cash budget, what is the maximum loan balance for January? Why are the numbers different?

On the basis of the monthly cash budget the maximum loan balance for the month of January is $83500. However, on the basis of the daily cash budget the maximum loan balance for January is $179371. The difference in these numbers is due to the daily cash budget schedule taking the values for each day. Resulting in the beginning cash with no borrowing increasing each day.

2. Which budget should the clinic rely upon, the daily or monthly? Why?

The clinic can use monthly budget at it will provide them with the opportunity to see quickly if the clinic will be able to meet its monthly expenditure.  A daily cash budget on the other hand is lot more detailed. However, it does not provide a business with the chance to see the bigger picture. The cons of a monthly cash budget on the other hand is that it might not show all of the borrowing requirements required as shown by the daily budget.  That is why, the clinic should rely on both daily and monthly budgets and not on a single one.

3. Construct scenarios when billings are 5% higher and lower than the base case scenario here.

 

Model Generated Data

 

Daliy Cash Budget Continued

 

Daliy Cash Budget Continued 2

 

Daliy Cash Budget Continued 3

4. How do these scenarios change the maximum potential loan balances?

 

potential loan balances

 

5. What credit line would you recommend for the clinic, using the best and worst scenarios as well?

I would recommend the clinics getting a line of credit of 8%.

.333 = interest rate for line of credit

.333/365 x 90 day billing period = .08

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