Chapter Case

Pleplcorn Manufacturing Working Capltal Management, Fart $1$

You recently have been hired by Plephom ManuAacturing to wark in its newly establlshed treasury departmemt.

Fiephom Manufacturing is a small compary that produces carcbourd boves in a variety of sizes. Gina Pleplicm,

the awner of the company, works primarly in the sales and production areas. Currently, the company puts all

recelvables in one shoe box and all payables in anothec. Because of the dborpanired system, the finance area

reeds work, and thar's what you've been brought in to do$.$

The company currently has a cash balance of $$138,000$ and plans to purchase new box$-$folding machinery in the

fourth cuarter at a cost of $$275,000.$ The purchase of the machlnery will be made whth cash because of the

dlscount oflered. The compary's polcy is to mahtain a target cash balance of $$100,000.$ All sales are in cash and

al purcheses are made on credlt.

Gina Piepkarn has projected the following gross sales for each of the next four quarters:

Groas sales for the fret quarter of next year are projected at $$315,000.$

Fiephom typlcally orders $50$ percent of next cuarter's projected gross sales in the current quarter, and suppllers

are typlcally pald in $53$ days. Wages, twes, and ather costs run about $30$ percent of cross sales. The compary

has a quarterly interest payment of $$105,000$ on its lang$-$tenm debt.

The company uses a local bank for lts short$-$term financial needs. It pays $1\mathrm{.}5$ percent per quarter on all short$-$serm!

borrowing and maintains a money market account that pays $1$ percent per quarter on all short$-$term depoats.

Glna has asked you to prepare a cash budget and short$-$tent financlal plan for the company under the current:

polleles. She also hes asked you to prepare additional plans based on changes In seversi Irputs.

QUESTIONS

Use the numbers given to complete the cash budget and short$-$term financlal plan.

Rework the cash budget and short$-$term financlal plan assuming Plepliom changes to a target balance of

$$90,000.$

Cach lladget

$01,02,03,04$

Hopinning cash balance

Net cash influs

Endifas cash balane:

Minimum cah halanse

Cumblative narplus $($alelic$)$

Shan$-$Tern Iranclal Flan

$01,02,03,04$

Tarnet cash balance

Nel cabh influe

New shocl$-$lerm inveslments

Incunc from shoelderm inveshenls

Siurlierm imsiments sold

New shocl$-$Aerm bursonire

Inierof un shoriferm beruerity

Shurkerm borruwing ropaid

Endifag cash tralanes

Minimum cah halanse

Cumalative arplus $($alelici$)$

Hexinning abse Herm imevlnents

Endity ahor Herm inculmenk

Hexinning ahor Herm debs

Enditz abor Herm deb