638 PART 1 Sortera arket account sh budget and additional plans M b MINICASE Piepkorn Manufacturing Working Capital Management Manufacturing o borrowing and maintains a money man cently been hired by Pienk percent per quarter on all short-term den the newly established treasury denartment. Piepkom Gary has asked you to prepare a cash bude a mall company that produces cardboard financial plan for the company under the curre a riety of sites for different purchasers. Ga He has also ask you to prepare additional the one of the company, works primarily in the changes in several inputs. o d production areas of the company. Currently, the com puny pis all receivables in one shoe box and all payables in the Beause of the disorganised system, the finance arca QUESTIONS needs work, and that's what you've been brought in to do . Use the numbers given to complete the cash borde The company currently has a cash balance of $305,000, and short-term financial plan. to purchase new box-folding machinery in the fourth 2 Rework the cash budget and short-term financial se quarter at a cost of $525.000. The machinery will be purchased assuming Piepkorn changes to a minimum balance with cash because of a discount offered. The company's policy S100,000 is to maintain a minimum cash balance of S125.000. All sales 3. You have looked at the credit policy offered by Piel and purchases are made on credit. Gary Pepkorn has projected the following gross sales for competitors and have determined that the industry each of the next four quarters dard credit policy is 1/10, net 40. The discount will be to be offered on the first day of the first quarter. You em 01 02 to examine how this credit policy would affect the cast 03 04 budget and short-term financial plan. If this credit policy Gross $1,310,000 $1,390,000 $1,440,000 $1,530,000 is implemented, you believe that 40 percent of all sales sales will take advantage of it, and the accounts receivable pe riod will decline to 36 days. Rework the cash budget and Also, gross sales for the first quarter of the next year are short-term financial plan under the new credit policy anda projected at $1,405,000. Piepkorn currently has an accounts minimum cash balance of $100,000. What interest rate receivable period of 53 days and an accounts receivable hal you effectively offering customers? ance of 5645,000. Twenty percent of the accounts receivable 4. You have talked to the company's suppliers about the balance is from a company that has just entered bankruptcy. credit terms Piepkorn receives. Currently, the company and it is likely this portion of the accounts receivable will never receives terms of net 45. The suppliers have stated that be collected. they would offer new credit terms of 1.5/15, net 40. The Piepkorn typically orders 50 percent of next quarter's pro- jected gross sales in the current quarter, and suppliers are typ- discount would begin to be offered on the first day of the ically paid in 42 days. Wages, taxes, and other costs run about first quarter. What interest rate are the suppliers offering 30 percent of gross sales. The company has a quarterly interest the company? Rework the cash budget and short-term payment of S135.000 on its long-term debt. Tinancial plan assuming you take the credit terms on The company uses a local bank for its short-term finan- orders and the minimum cash balance is $100,000 cial needs. It pays 1.5 percent per quarter on all short-term assume that Pepkorn offers the credit terms detailed Question 3. PIEPKORN MANUFACTURING Cash Budget 01 02 03 04 - Target cash balance Net cash inflow Ending cash balance Minimum cash balance Cumulative surplus (deficit) *If you are not familiar with credit policy quotations, see Chapter 20 Chapter 18 Short Term Finance and Planning 03 04 PIEPKORN MANUFACTURING Short Term Financial Plan 01 02 Target cash balance Net cash inflow New short-term investments Income from short-term investments Short-term investments sold New short-term borrowing Interest on short-term borrowing Short-term borrowing repaid Ending cash balance Minimum cash balance Cumulative surplus (deficit) Beginning short-term investments Ending short-term investments Beginning short-term debt Ending short-term debt - 638 PART 7 Short Term Financial Planning and Management are a cash budget and the dinical plans MINICASE Piepkorn Manufacturing Working Capital Management borrowing and maintains a money market You have recently been hired by Pierkorn Manufacturing to 1 percent per quarter on all short-term de work in the newly established treasury department. Piepkorn Gary has asked you to prepare a cash bu Manufacturing is a small m any that produces cardboard term financial plan for the company under the gume boxes in a variety of sizes for different purchasers. Gary He has also asked you to prepare additional Piepkorn, the owner of the company, works primarily in the changes in several inputs. sales and production areas of the company. Currently, the com pany puts all receivables in one shoe box and all payables in another. Because of the disorganized system, the finance area QUESTIONS needs work, and that's what you've been brought in to do. 1. Use the numbers given to complete the cash budget and The company currently has a cash balance of $305,000, and short-term financial plan. it plans to purchase new box-folding machinery in the fourth 2. Rework the cash budget and short-term financial plan quarter at a cost of $525.000. The machinery will be purchased assuming Piepkorn changes to a minimum balance of with cash because of a discount offered. The company's policy $100,000. is to maintain a minimum cash balance of $125,000. All sales and purchases are made on credit. 3. You have looked at the credit policy offered by Piepiloma's Gary Piepkorn has projected the following gross sales for competitors and have determined that the industry each of the next four quarters: dard credit policy is 1/10, net 40. The discount will begin to be offered on the first day of the first quarter. You want 01 02 03 04 to examine how this credit policy would affect the cash budget and short-term financial plan. If this credit policy Gross $1,310,000 $1.390.000 $1,440.000 $1.530,000 Sales is implemented, you believe that 40 percent of all sales will take advantage of it, and the accounts receivable pe riod will decline to 36 days Rework the cash budget and Also, gross sales for the first quarter of the next year are short-term financial plan under the new credit policy and projected at $1,405,000. Piepkorn currently has an accounts minimum cash balance of S100,000. What interest ratt receivable period of 53 days and an accounts receivable bal ance of $645.000. Twenty percent of the accounts receivable you effectively offering customers? 4. You have talked to the company's suppliers about the balance is from a company that has just entered bankruptcy. and it is likely this portion of the accounts receivable will never credit terms Pienkorn receives. Currently, the company be collected receives terms of net 45. The suppliers have stated that Piepkorn typically orders 50 percent of next quarter's pro- they would offer new credit terms of 15/15. net 40. The jected gross sales in the current quarter, and suppliers are typ- discount would begin to be offered on the first day of ically paid in 42 days. Wages, taxes, and other costs run about first quarter. What interest rate are the suppliers of 30 percent of gross sales. The company has a quarterly interest the company? Rework the cash budget and short-term payment of $135.000 on its long-term debt. financial plan assumine you take the credit terms The company uses a local bank for its short-term finan orders and the minimum cash balance is $100,000 AS cial needs. It pays 15 percent per quarter on all short-term assume that Piepkorn offers the credit terms delam Question 3 PIEPOS MANUFACTURING Cash Budget 02 03 04 Target cash balance Net cash inflow Ending cash balance Minimum cash balance Cumulative surplus deficit if you wote with credit policy e Chapter 20 Chapter 18 Shon-Term Finance and Planning 639 Q3 Q4 PIEPKORN MANUFACTURING ShortTerm Financial Plan Q1 Q2 Target cash balance Net cash inflow New short-term investments t-term investments Income from short-term investments Short-term investments sold New short-term borrowing Interest on short-term borrowing Short-term borrowing repaid Ending cash balance Minimum cash balance Cumulative surplus (deficit) Beginning short-term investments Ending short-term investments Beginning short-term debt Ending short-term debt IT 638 PART 1 Sortera arket account sh budget and additional plans M b MINICASE Piepkorn Manufacturing Working Capital Management Manufacturing o borrowing and maintains a money man cently been hired by Pienk percent per quarter on all short-term den the newly established treasury denartment. Piepkom Gary has asked you to prepare a cash bude a mall company that produces cardboard financial plan for the company under the curre a riety of sites for different purchasers. Ga He has also ask you to prepare additional the one of the company, works primarily in the changes in several inputs. o d production areas of the company. Currently, the com puny pis all receivables in one shoe box and all payables in the Beause of the disorganised system, the finance arca QUESTIONS needs work, and that's what you've been brought in to do . Use the numbers given to complete the cash borde The company currently has a cash balance of $305,000, and short-term financial plan. to purchase new box-folding machinery in the fourth 2 Rework the cash budget and short-term financial se quarter at a cost of $525.000. The machinery will be purchased assuming Piepkorn changes to a minimum balance with cash because of a discount offered. The company's policy S100,000 is to maintain a minimum cash balance of S125.000. All sales 3. You have looked at the credit policy offered by Piel and purchases are made on credit. Gary Pepkorn has projected the following gross sales for competitors and have determined that the industry each of the next four quarters dard credit policy is 1/10, net 40. The discount will be to be offered on the first day of the first quarter. You em 01 02 to examine how this credit policy would affect the cast 03 04 budget and short-term financial plan. If this credit policy Gross $1,310,000 $1,390,000 $1,440,000 $1,530,000 is implemented, you believe that 40 percent of all sales sales will take advantage of it, and the accounts receivable pe riod will decline to 36 days. Rework the cash budget and Also, gross sales for the first quarter of the next year are short-term financial plan under the new credit policy anda projected at $1,405,000. Piepkorn currently has an accounts minimum cash balance of $100,000. What interest rate receivable period of 53 days and an accounts receivable hal you effectively offering customers? ance of 5645,000. Twenty percent of the accounts receivable 4. You have talked to the company's suppliers about the balance is from a company that has just entered bankruptcy. credit terms Piepkorn receives. Currently, the company and it is likely this portion of the accounts receivable will never receives terms of net 45. The suppliers have stated that be collected. they would offer new credit terms of 1.5/15, net 40. The Piepkorn typically orders 50 percent of next quarter's pro- jected gross sales in the current quarter, and suppliers are typ- discount would begin to be offered on the first day of the ically paid in 42 days. Wages, taxes, and other costs run about first quarter. What interest rate are the suppliers offering 30 percent of gross sales. The company has a quarterly interest the company? Rework the cash budget and short-term payment of S135.000 on its long-term debt. Tinancial plan assuming you take the credit terms on The company uses a local bank for its short-term finan- orders and the minimum cash balance is $100,000 cial needs. It pays 1.5 percent per quarter on all short-term assume that Pepkorn offers the credit terms detailed Question 3. PIEPKORN MANUFACTURING Cash Budget 01 02 03 04 - Target cash balance Net cash inflow Ending cash balance Minimum cash balance Cumulative surplus (deficit) *If you are not familiar with credit policy quotations, see Chapter 20 Chapter 18 Short Term Finance and Planning 03 04 PIEPKORN MANUFACTURING Short Term Financial Plan 01 02 Target cash balance Net cash inflow New short-term investments Income from short-term investments Short-term investments sold New short-term borrowing Interest on short-term borrowing Short-term borrowing repaid Ending cash balance Minimum cash balance Cumulative surplus (deficit) Beginning short-term investments Ending short-term investments Beginning short-term debt Ending short-term debt - 638 PART 7 Short Term Financial Planning and Management are a cash budget and the dinical plans MINICASE Piepkorn Manufacturing Working Capital Management borrowing and maintains a money market You have recently been hired by Pierkorn Manufacturing to 1 percent per quarter on all short-term de work in the newly established treasury department. Piepkorn Gary has asked you to prepare a cash bu Manufacturing is a small m any that produces cardboard term financial plan for the company under the gume boxes in a variety of sizes for different purchasers. Gary He has also asked you to prepare additional Piepkorn, the owner of the company, works primarily in the changes in several inputs. sales and production areas of the company. Currently, the com pany puts all receivables in one shoe box and all payables in another. Because of the disorganized system, the finance area QUESTIONS needs work, and that's what you've been brought in to do. 1. Use the numbers given to complete the cash budget and The company currently has a cash balance of $305,000, and short-term financial plan. it plans to purchase new box-folding machinery in the fourth 2. Rework the cash budget and short-term financial plan quarter at a cost of $525.000. The machinery will be purchased assuming Piepkorn changes to a minimum balance of with cash because of a discount offered. The company's policy $100,000. is to maintain a minimum cash balance of $125,000. All sales and purchases are made on credit. 3. You have looked at the credit policy offered by Piepiloma's Gary Piepkorn has projected the following gross sales for competitors and have determined that the industry each of the next four quarters: dard credit policy is 1/10, net 40. The discount will begin to be offered on the first day of the first quarter. You want 01 02 03 04 to examine how this credit policy would affect the cash budget and short-term financial plan. If this credit policy Gross $1,310,000 $1.390.000 $1,440.000 $1.530,000 Sales is implemented, you believe that 40 percent of all sales will take advantage of it, and the accounts receivable pe riod will decline to 36 days Rework the cash budget and Also, gross sales for the first quarter of the next year are short-term financial plan under the new credit policy and projected at $1,405,000. Piepkorn currently has an accounts minimum cash balance of S100,000. What interest ratt receivable period of 53 days and an accounts receivable bal ance of $645.000. Twenty percent of the accounts receivable you effectively offering customers? 4. You have talked to the company's suppliers about the balance is from a company that has just entered bankruptcy. and it is likely this portion of the accounts receivable will never credit terms Pienkorn receives. Currently, the company be collected receives terms of net 45. The suppliers have stated that Piepkorn typically orders 50 percent of next quarter's pro- they would offer new credit terms of 15/15. net 40. The jected gross sales in the current quarter, and suppliers are typ- discount would begin to be offered on the first day of ically paid in 42 days. Wages, taxes, and other costs run about first quarter. What interest rate are the suppliers of 30 percent of gross sales. The company has a quarterly interest the company? Rework the cash budget and short-term payment of $135.000 on its long-term debt. financial plan assumine you take the credit terms The company uses a local bank for its short-term finan orders and the minimum cash balance is $100,000 AS cial needs. It pays 15 percent per quarter on all short-term assume that Piepkorn offers the credit terms delam Question 3 PIEPOS MANUFACTURING Cash Budget 02 03 04 Target cash balance Net cash inflow Ending cash balance Minimum cash balance Cumulative surplus deficit if you wote with credit policy e Chapter 20 Chapter 18 Shon-Term Finance and Planning 639 Q3 Q4 PIEPKORN MANUFACTURING ShortTerm Financial Plan Q1 Q2 Target cash balance Net cash inflow New short-term investments t-term investments Income from short-term investments Short-term investments sold New short-term borrowing Interest on short-term borrowing Short-term borrowing repaid Ending cash balance Minimum cash balance Cumulative surplus (deficit) Beginning short-term investments Ending short-term investments Beginning short-term debt Ending short-term debt IT