CASE STUDY #$2$

You have recently been hired to work in your company$$s newly established treasury department. The company is a small company that produces cardboard boxes in a variety of sizes for different purchases. The owner of the company, works primarily in the sales and production areas of the company. Currently, the company puts all receivables in one shoe box and all payables in another. Because of the disorganized system, the finance area needs work $$ and that$$s what you have been brought in to do$.$

The company currently has a cash balance of $$305,000$ and it plans to purchase new box$-$folding machinery in the fourth quarter at a cost of $$525,000.$ The machinery will be purchased with cash because of a discount offered. The company$$s policy is to maintain a minimum cash balance of #$125,000.$ All sales and purchases are made on credit. The owner has projected the following gross sales for each of the next four quarters

gross sales Q$11\mathrm{.}310\mathrm{.}000$

Q$21\mathrm{.}390\mathrm{.}000$

Q$31\mathrm{.}440\mathrm{.}000$

Q$41\mathrm{.}530\mathrm{.}000$

Also, gross sales for the first quarter of the next year are projected at $$1,405,000.$ The company currently has an accounts receivable period of $53$ days and an accounts receivable balance of $$645,000.20\%$ of the accounts receivable balance is from a company that has just entered bankruptcy, and it is likely this portion of the accounts receivable will never be collected.

The company typically orders $50\%$ of the next quarter$$s projected gross sales in the current quarter, and suppliers are typically paid in $42$ days. Wages, taxes and other costs run about $30\%$ of gross sales. The company has a quarterly interest payment of $$135,000$ on its long tern debt.

The company uses a local bank for its short$-$term financial needs. It pays $1\mathrm{.}5\%$ per quarter on all short$-$term borrowing and maintains a money market accounts that pays $1\%$ per quarter on all short$-$term deposits.

You have been asked to prepare a cash budget and short$-$term financial plan for the company under the current policies. You have also been asked to prepare additional$/$alternative plans based on changes in several inputs.

$1.$ Use the numbers given to complete the cash budget and short$-$tern financial plan in Excel. $($Sheet $1)$

$2.$ Rework the cash budget and short$-$term financial plan assuming the minimum balance is changed to $$100,000($Sheet $2)$

question $1$ and $2$ is the same shee