Building Blocks has a beginning cash balance for the quarter of $800. The firm's president requires a minimum cash balance of $800 be maintained at all times. Further, the president has a policy of borrowing when necessary to maintain that balance. If funds have been borrowed, then the president requires they be repaid as soon as excess funds are available. How much will the firm borrow or repay this quarter if the quarterly receipts are $2,565 and the quarterly disbursements are $2,607?
A) Borrow $42.
B) Borrow $38.
C) Neither borrow nor repay.
D) Repay $38.
E) Repay $42.

Question

Quizplus · Accepted Answer

The firm will start with $800 and receive $2,565, totaling $3,365. After disbursements of $2,607, the firm will have $758, which is below the required $800 minimum. Therefore, the firm will need to borrow $42 to maintain the minimum balance.

Building Blocks Has a Beginning Cash Balance for the Quarter