Cyberpunk Co., a Polish video game developer, publisher and distributor based in Warsaw, was founded

in May 1994 by Marcin Iwiski and Micha Kiciski. The company is very famous among gamers, and is

regarded as one of the best in the industry, mostly because of their critically acclaimed game series "The

Witcher". In addition to game development, a video game distribution service, GOG.com was established

by Cyberpunk to help players find old games. Its mission is to offer games free of digital rights

management (DRM) to players and its service was expanded to cover new top tier games made by the

best in the industry and some independent games from the old era of gaming.

By selling games, the company generates a half-monthly revenue of about $2100, which is deposited

directly to a current account(pays no interest) at a nearby bank. For meeting day to day cash needs, $1200

is always kept aside in that current account. Whenever the current account balance is above $1200,

Cyberpunk transfers the excess amount to a separate savings account that pays half-yearly interest of 1%.

Cyberpunk currently has $15,000 in the savings account, and presently the company usually transfers

about $500 from the sales proceedings to the savings account each month. The company never delays on

the payment of any kind of financial obligations or bills, and such bills are usually around $2,850 per

month.

Marcin Iwiski and Micha Kiciski are wondering if they should, instead of keeping all the excess cash in

the savings account, start investing in short-term fixed deposits offered by local banks which pay an annual

interest of 4.75%. As the company did not have any financial specialist, they came to you for your advice

on what to do.

You start by analyzing the company's cash collection and disbursement trends, and realize that the

although the company usually has 30 days to pay any dues after occurrence, the company pays all its

outstanding dues 9 days earlier till the last payment date.

You now have a better understanding of the situation, and know that you have look at various options of

earning interests by managing/modifying the company's cash inflows, outflows and interest earning tools.

Requirements(Show calculations where necessary)

a) What is your advice on managing the balances on both the current and savings account and why?

That is, where Cyberpunk should keep/invest its cash and why? (2 Marks)

b) What should Cyberpunk do if there are excess amount of cash on the current account? Why? (2 Marks)