Adjust the Cash Balance | For Journey Company

Adjust the Cash Balance We obtain the following 2018 forecasts of selected financial statement line items for Journey Company

Adjust the Cash Balance

We obtain the following 2018 forecasts of selected financial statement line items for Journey Company.

$ millions 2017 Actual 2018 Est.
Net Sales $728,553 $760,438
Marketable securities 67,096 62,096
Long-term debt 346,558 308,437
Treasury stock (deducted from equity) 51,174 51,174
Cash generated by operations 57,807
Cash used for investing (15,019)
Cash used for financing (54,549)
Total net change in cash (11,761)
Cash at beginning of period 51,141
Cash at end of period $39,380

 

Does forecasted cash deviate from the normal level for this company? 
Calculate the company’s normal cash level as a percentage of sales.
Round answer to one decimal place.
Answer = 7 %
Using the rounded answer above, compute what should be the normal cash balance for FY2018.
Round answer to the nearest million.
$Answer = 0 million

b. Is the deviation in part a large enough to require adjustment? Explain. 

No. the deviation is not large enough to require an adjustment.

Yes, the deviation is large enough to require an adjustment.

C. Identify three ways to adjust the forecasted cash balance.

Which option would least likely be used to adjust the cash balance?

Sell marketable securities

Decrease capital expenditures

Increase long-term debt

Sell treasury stock

d. Fill in the blanks in the following statement of cash flows assuming long-term debt is used to adjust the forecasted cash balance.

Use negative signs with answers, when appropriate.

Cash generated by operations $Answer 57807

 

Cash used for investing Answer -15019

 

Cash used for financing Answer -40698

 

Total change in cash Answer 2090

 

Cash at beginning of period Answer 51141

 

Cash at end of period $Answer 53231

 

Fill in the blanks in the following statement of cash flows assuming marketable securities are used to adjust the forecasted cash balance.

Use negative signs with answers, when appropriate.

Cash generated by operations $Answer 57807

 

Cash used for investing Answer -1168

 

Cash used for financing Answer -54549

 

Total change in cash Answer 2090

 

Cash at beginning of period Answer 51141

 

Cash at end of period $Answer 53231

 

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