Cash cycle (days) 18-392 Mini Case - Cash budget and Short-term financial planning Middleton Manufacturing treasury department. Middleton Manufacturing is a small company with disorganized systems You have recently been hired by Middleton Manufacturing to work in the newly established and the finance area needs work. The company currently has a beginning cash balance of $100.000 and plans to buy new machinery during the fourth quarter for S500,000, paying cash. The company maintains a minimum cash balance of $100,000 and invests any excess cash in a money market account. The company borrows short-term from CIBC, paying 1.5 percent interest per quarter on all short- term borrowing, and receives 1% per quarter from any balances in its money market account. The company pays $110,000 of interest each quarter for its long-term debt. All sales and purchases are made on credit. Credit sales for each of the next four quarters: 01 03 QL $1,360,000 $1,440,000 $1,500,000 $1,600,000 1420050 The forecasted credit sales for Q1 of next year is $1,420,000. Middleton currently has an average collection period of 45 days and beginning accounts receivable of $500,000. Twenty percent of the beginning balance of accounts receivable balance is from a company that has just entered bankruptcy. This account receivable will not be collected. Purchases are done one quarter in advance and represent 50% of the next quarter's sales (cost of inventory sold is 50% of sales). Suppliers are paid after 30 days. Wages, taxes, and other costs average 30 percent of gross sales and are paid in cash in same quarter when they occur. Required: You have been asked to prepare a cash budget and short-term financial plan for the company under the current policies. Q2 04 Grosses 1 Page DO Cash budget ARM beginning of collected Sales collection in Current Q2 TOTAL COLLECTIONS: Purchases from last paid this o Purchase for next paid this 01 500 000 1360 1180000 ? 72 0 408NO UO 2000 140 14600D 720 780cr 43266 \\ Expenses (304) sales Interest and dividends 41200 Capital outlay TOTAL DISBURSEMENTS: Net cash inflow (outflow) Short term financial plan 03 04 720000 750000 500.00 1470 60 23500T 75000 200000 2D710OTO 41500 100 son. 21 loon 26. (640509 775006) Q3 04 (1250 000 (1290000 (640000) (5008D (1890000 (2640050 (10000 100 000 Beginning cash balance Net cash inflow 1912050 2012.000 (737680 (266) Q1 Q2 1.00 000 (738850) CG12000 (6386001(250000 (107000) (100 000) (738600 (1350070) (1990000 (27400 Ending cash balance Target cash balance Surplus/(Shortfall) Short term investments - beginning Interest received New short-term investments Short term investments sold (including interest) Short term investment - ending Short term borrowings - beginning Interest paid 75VO (738000 11070 73800 13500 New short-term borrowings Short term borrowings repaid (including interest) Short term borrowings - ending (738000)