Mini Case - Cash budget and Short-term financial planning Middleton Manufacturing You have recently been hired by Middleton Manufacturing to work in the newly established treasury department. Middleton Manufacturing is a small company with disorganized systems 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 $500,000, 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 shortterm 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: 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.

Cash budget Q1 Q2 Q3 Q4 A/R at beginning of Q collected Sales collection in current Q TOTAL COLLECTIONS: Purchases from last Q paid this Q Purchase for next Q paid this Q Expenses Interest and dividends Capital outlay TOTAL DISBURSEMENTS: Net cash inflow/(outflow) Short term financial plan Q1 Q2 Q3 Q4 Beginning cash balance Net cash inflow Ending cash balance Target cash balance Surplus/(Shortfall) Short term investments - beginning Interest received New short-term investments Short term investments sold (includinginterest) Short term investment - ending Short term borrowings - beginning Interest paid New short-term borrowings Short term borrowings repaid (including interest) Short term borrowings - ending