Your firm has a net cash inflow for the quarter of $44. The beginning cash balance is $27. Company policy is to maintain a minimum cash balance of $25 and borrow only the amount that is necessary to maintain that balance. How much does your firm need to borrow or how much can it repay on its loans to have a zero cumulative surplus?
A) Neither borrow nor repay.
B) Borrow $44.
C) Repay $44.
D) Borrow $46.
E) Repay $46.

Question

Quizplus · Accepted Answer

The firm has a beginning cash balance of $27 and a net cash inflow of $44, resulting in a total cash balance of $71. Since the minimum required balance is $25, the firm can repay $46 ($71 - $25) to maintain the minimum balance.

Your Firm Has a Net Cash Inflow for the Quarter