1) You're the CFO of the Wachusett Window Company, which sells windows to residential builders. The firm's customers tend to be small, thinly capitalized construction companies that are frequently short of cash. Over the past year, there's been a slump in the housing industry and Wachusett's sales have slowed. Several months ago, the marketing department initiated a program to attract new customers to counteract the downward sales trend. The VP of Marketing and the president agreed that the firm would have to deal with even smaller, newer builders if it was going to keep sales up. At the time the president overruled your concerns about the credit quality of such customers. He personally approved several accounts brought in by the sales department that ordinarily wouldn't have qualified for credit. More recently receivables have gone up substantially, and collection efforts have been less successful than usual. Collectors have asked for help from sales representatives in chasing down delinquent customers, but the VP of marketing says they don't have time because "reps have to be out on the street selling." The president has suddenly become concerned about the receivables increase and has demanded to know why Finance has let it happen. Prepare a memo explaining the processes behind the creation and management of receivables and explain what's behind the increase. Tactfully explain why the blame should not be placed solely on the finance department. Can you argue that finance is completely without fault in this matter? RESPONSE

2) The Philipps Lighting Company manufactures decorative light fixtures. Its revenues are about $100 million a year. It purchases inputs from approximately 20 suppliers, most of which are much larger companies located in various parts of the country. Sam Spade, the vice president of manufacturing is a sophisticated executive who has always been very impressed by the latest innovative techniques in management. Last week Sam came into a meeting of the executive team with a proposal to cut inventory costs to almost nothing. Just in time (JIT) is the wave of the future, he said, and proposed that Philipps enter into negotiations with all its suppliers to implement the concept immediately. You're the CFO and tend to be more skeptical about new methods. Prepare a memo to the team, tactfully outlining the problems and risks involved in Sam's proposal. RESPONSE

Five suppliers of Buchanan Ltd offer the following terms of sale. i. Supplier A: 2/10, net 30 ii. Supplier B: 1/5, net 15 iii. Supplier C: 5/10, net 30 iv. Supplier D: 2.5/10, net 25 v. Supplier E: 1/5, net 20

. 4) Nire Ltd has determined that its short-term investments are yielding 5% annually and the cost is $25 each time it buys and sells securities. Nires total assets amount to $150,000, the variance of its daily cash flows is estimated to be $43,590 and the firm wants to keep a minimum 10% of total assets in a cash account. a) What is the firms target cash balance? RESPONSE b) What is the firms upper limit for the cash account?