Your ﬁrm has a net cash inﬂow for the quarter of -£30 (negative).The beginning cash balance is £15. Company policy is to maintain a minimum cash balance of £5 and borrow only the amount that is
Necessary to maintain that balance.How much does your ﬁrm need to borrow to have a zero
Cumulative surplus?

Question

Quizplus · Accepted Answer

To have a zero cumulative surplus, the net cash inflow and outflow should be balanced. Since the net cash inflow is -£30 and the beginning cash balance is £15, the ending cash balance without borrowing would be £15 - £30 = -£15, which is below the minimum cash balance policy of £5. Therefore, the firm needs to borrow an amount that will bring the ending cash balance to £5. The amount that needs to be borrowed is £5 - (-£15) = £20. Therefore, the correct answer is C.

Your ﬁRm Has a Net Cash Inﬂow for the Quarter