5 Short Term Financial Mgmt
B. Based on your findings in part b, will the company need any outside financing?
Based on our findings in Part A, the company will definitely need outside financing. There is a cash deficit in three months out of the year that was examined. The months that are deficits are March, April, and June 2004. If there is no outside financing brought into the company, the cash that is needed in order to cover the expenses that are incurred the month following each deficit will not be available. Without the cash being fed into the company through financing, there would be no way for the company to pay the expenses such as administration, materials, lease or income taxes. A company cannot stay continue to operate if there are more expenses than there is revenue. By acquiring outside financing, the company “buys” itself time to better its financial standing and gives them the cash to pay the expenses that are needed to keep the business afloat.
C. What is the minimum line of credit......
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