Craft Shack has a beginning cash balance for the quarter of $1,213. The store has a policy of maintaining a minimum cash balance of $1,000 and is willing to borrow funds as needed to maintain that balance. Currently, the firm has a loan balance of $410. How much will the store borrow or repay if the net cash flow for the quarter is −$260?

Question

Quizplus · Accepted Answer

Starting cash balance = $1,213 
Minimum cash balance = $1,000 
Loan balance = $410

If the net cash flow for the quarter is −$260, then the ending cash balance will be:
$1,213 - $260 = $953

Since the minimum cash balance required is $1,000, the store needs to borrow funds to maintain that balance.

$953 - $1,000 = -$47

Therefore, the store needs to borrow $47 to maintain the minimum cash balance. So, the answer is D) Borrow $47.

Craft Shack Has a Beginning Cash Balance for the Quarter