Clancy's has a beginning cash balance of $27 and a net cash inflow for the quarter of −$52.Company policy is to maintain a minimum cash balance of $20 and borrow only the amount that is necessary to maintain that balance.How much,if any,does the firm need to borrow this quarter?
A)$17
B)$52
C)$45
D)$25
E)$0

Question

Quizplus · Accepted Answer

To determine how much the firm needs to borrow, we need to calculate its ending cash balance.

Beginning cash balance: $27
Net cash inflow: -$52
Ending cash balance without borrowing: $27 - $52 = -$25

Since the ending cash balance without borrowing is less than the minimum cash balance the firm wants to maintain, it needs to borrow.

Amount needed to reach minimum cash balance: $20 - (-$25) = $45

Therefore, the firm needs to borrow $45 this quarter.

Clancy's Has a Beginning Cash Balance of $27 and a Net