BACKGROUND OF THE STUDY

MY INTERNAL ‘FARMER’S ALMANAC’ warn me that there could be cash flow problems
soon,” said Sarah Clare, the manager of Dinner Bell Hotel (DBH), a Michigan resort. (The Farmer’s
Almanac is a periodical famous for its long‐range weather predictions and astronomical data, as well
as humor, trivia, and personal advice.) Sarah continued: “We need to know now what the likely
situation will be. I think I’d better redo the forecast.” Two months ago (in early January 2011), Sarah
and her financial staff had prepared a cash flow forecast for the period July 2011 to March 2012. July
through early November is the busiest times for the hotel. Summer and fall guests enjoy the
atmosphere of an old‐fashioned resort with large meals, farm animals, a petting zoo, nature walks,
bicycling and hiking trails, fishing, tennis courts, a lake for swimming and boating, and a nine‐hole
golf course. The phrase “dinner bell” dates back about two centuries, when people who lived and
worked on vast tracts of land as ranchers or farmers needed a way to be called to dinner. The hotel
continues that tradition by ringing a bell to announce mealtime. The weather gets too cold by early
November for most outdoor activities, so the hotel built an indoor pool and developed long theme
weekends like classic movies, card tournaments, and supervised child and teen amusements. It is not
unusual for the hotel to run cash deficits during most, if not all, of the months between November
and April, and about break-even in May and June. However, the cash surplus generated during the
peak period, from July through November, is typically sufficient to meet the shortfall. This is what
Sarah had predicted would occur when she had made the cash budget projection for July onward.

STATEMENT OF THE PROBLEM

What are the possible ways to come up to the shortfall?

ALTERNATIVE COURSES OF ACTION

 Factoring of receivables if there’s instances receivables occur
 Bank borrowings to maintain liquidity of their Total Current Assets
 Stretching or deferring of payables must exist for them to look for the working capital and
used it as a part of their financial solutions.

Conclusion
Hence, it ends into cash budgeting method, it seems that in that way almost like a business
cycle which maturity and shortfall always exist. No matter how we try to avoid that we have to
manage it well. We come up to the forecasted sales and manage cash of the company to eliminate
the possibility of losing liquidity. I made it clear that supposing there is shortfall on cash we used to
stretch our payables into the supplier to lessen the cash outflow.