Piepkorn Manufacturing Working Capital Management, Part 2 A' fter completing the short-term financial plan for next year (at the end of Chapter 16), Gary Piepkorn ap- proaches you and asks about the company's credit pol- icy. In looking at the competition, most companies in the industry offer credit to customers, so Piepkorn Manufac- turing appears to be one of the few companies that does not. Several customers have expressed the possi- bility of changing to a different supplier because of the lack of credit. Gary is interested in knowing how imple- menting a credit policy will affect the short-term financial plan for next year. Additionally, he would like you to in- quire as to the possibility of getting improved credit terms for the company's purchases.
To analyze the possible switch to the new credit terms, Gary has asked you to investigate industry stan- dard credit terms and rework the short-term financial plan assuming Piepkorn Manufacturing offers credit to its customers. He would also like to investigate how bet- ter credit terms from the company's suppliers would af- fect the short-term financial plan.
QUESTIONS
1. You have looked at the credit policy offered by your competitors and have determined that the industry standard credit policy 1/10, net 45. The discount will begin to be offered on the first day of the year. You want to examine how this credit pol- icy would affect the cash budget and short-term financial plan. If this credit policy is implemented, you believe that 60 percent of customers will take advantage of the credit offer and the accounts re- ceivable period will be 24 days. Rework the cash budget and short-term financial plan under the new credit policy and a target cash balance of $80,000. What interest rate are you effectively offering customers?
2. You have talked to the company's suppliers about the credit terms Piepkorn receives. Currently, the company receives terms of net 45. Your suppliers have stated that they would offer new credit terms of 2/25, net 40. The discount would begin to be offered on the first day of the year. What interest rate are the suppliers offering the company? Re- work your cash budget and short-term financial plan from the previous question assuming you take advantage of the discount offered.
Case Study 07: Piepkorn Manufacturing Working Capital Management, Part 1 you have recently been hired by Pepkorn Manufacturing to work in its newly established treasury department Pepkor M acturing is avall.com that produce candhandh a way owner of the works in these and production resume the receivables in one shoebox all e s in other c ofthed work, and that's what you've been brought in toda Gary Plan the wall the face are needs i The company currently has a cash balance of $154000 am to purchase w fourth quarter at a cost of $325.000. The purchase of the machinery will be made with the offered. The comm 's policy is to maintai atat cash balance of $100.000 are made on credit nery in the of the discount dal purchases Gary Piepkorn has projected the following gross sales for each of the next fourquarters 01 S863,500 Gross Sales 0203 $918,500 $996.000 04 5924,000 Gross sales for the first quarter of next year are projected at $900.000 Pieper typically orders 50 percent of next quarter's projected sales in the current water suppliers are typically paid in 3 days. Wates, aes, and other costs run out 30 percent of sales. The company has a quarterly interest payment of $115.000 on its long-term debt. The company uses a local bank for its short-term financial needs. It pays 15 per borrowing and maintains a money market account that pays 1 percent per quarter pergueren all short-term short-term deposits Gary has asked you to prepare a cash budget and short-term financial plan for the company under the current policies. He has also asked you to prepare additional plans based on changes in several inputs QUESTIONS 1. Use the numbers given to complete the cash budget and short-term financial plan 2. Rework the cash budget and short-term financial plan assuming Pieper changes to a targethal ance of 50,000 01 02 03 04 PIEPKORN MANUFACTURING Cash Budget 01 02 03 Begance Netshow 04 Muchance Cum Case Study 07: Piepkorn Manufacturing Working Capital Management, Part 1 you have recently been hired by Pepkorn Manufacturing to work in its newly established treasury department Pepkor M acturing is avall.com that produce candhandh a way owner of the works in these and production resume the receivables in one shoebox all e s in other c ofthed work, and that's what you've been brought in toda Gary Plan the wall the face are needs i The company currently has a cash balance of $154000 am to purchase w fourth quarter at a cost of $325.000. The purchase of the machinery will be made with the offered. The comm 's policy is to maintai atat cash balance of $100.000 are made on credit nery in the of the discount dal purchases Gary Piepkorn has projected the following gross sales for each of the next fourquarters 01 S863,500 Gross Sales 0203 $918,500 $996.000 04 5924,000 Gross sales for the first quarter of next year are projected at $900.000 Pieper typically orders 50 percent of next quarter's projected sales in the current water suppliers are typically paid in 3 days. Wates, aes, and other costs run out 30 percent of sales. The company has a quarterly interest payment of $115.000 on its long-term debt. The company uses a local bank for its short-term financial needs. It pays 15 per borrowing and maintains a money market account that pays 1 percent per quarter pergueren all short-term short-term deposits Gary has asked you to prepare a cash budget and short-term financial plan for the company under the current policies. He has also asked you to prepare additional plans based on changes in several inputs QUESTIONS 1. Use the numbers given to complete the cash budget and short-term financial plan 2. Rework the cash budget and short-term financial plan assuming Pieper changes to a targethal ance of 50,000 01 02 03 04 PIEPKORN MANUFACTURING Cash Budget 01 02 03 Begance Netshow 04 Muchance Cum Case Study 07: Piepkorn Manufacturing Working Capital Management, Part 1 you have recently been hired by Pepkorn Manufacturing to work in its newly established treasury department Pepkor M acturing is avall.com that produce candhandh a way owner of the works in these and production resume the receivables in one shoebox all e s in other c ofthed work, and that's what you've been brought in toda Gary Plan the wall the face are needs i The company currently has a cash balance of $154000 am to purchase w fourth quarter at a cost of $325.000. The purchase of the machinery will be made with the offered. The comm 's policy is to maintai atat cash balance of $100.000 are made on credit nery in the of the discount dal purchases Gary Piepkorn has projected the following gross sales for each of the next fourquarters 01 S863,500 Gross Sales 0203 $918,500 $996.000 04 5924,000 Gross sales for the first quarter of next year are projected at $900.000 Pieper typically orders 50 percent of next quarter's projected sales in the current water suppliers are typically paid in 3 days. Wates, aes, and other costs run out 30 percent of sales. The company has a quarterly interest payment of $115.000 on its long-term debt. The company uses a local bank for its short-term financial needs. It pays 15 per borrowing and maintains a money market account that pays 1 percent per quarter pergueren all short-term short-term deposits Gary has asked you to prepare a cash budget and short-term financial plan for the company under the current policies. He has also asked you to prepare additional plans based on changes in several inputs QUESTIONS 1. Use the numbers given to complete the cash budget and short-term financial plan 2. Rework the cash budget and short-term financial plan assuming Pieper changes to a targethal ance of 50,000 01 02 03 04 PIEPKORN MANUFACTURING Cash Budget 01 02 03 Begance Netshow 04 Muchance Cum Case Study 07: Piepkorn Manufacturing Working Capital Management, Part 1 you have recently been hired by Pepkorn Manufacturing to work in its newly established treasury department Pepkor M acturing is avall.com that produce candhandh a way owner of the works in these and production resume the receivables in one shoebox all e s in other c ofthed work, and that's what you've been brought in toda Gary Plan the wall the face are needs i The company currently has a cash balance of $154000 am to purchase w fourth quarter at a cost of $325.000. The purchase of the machinery will be made with the offered. The comm 's policy is to maintai atat cash balance of $100.000 are made on credit nery in the of the discount dal purchases Gary Piepkorn has projected the following gross sales for each of the next fourquarters 01 S863,500 Gross Sales 0203 $918,500 $996.000 04 5924,000 Gross sales for the first quarter of next year are projected at $900.000 Pieper typically orders 50 percent of next quarter's projected sales in the current water suppliers are typically paid in 3 days. Wates, aes, and other costs run out 30 percent of sales. The company has a quarterly interest payment of $115.000 on its long-term debt. The company uses a local bank for its short-term financial needs. It pays 15 per borrowing and maintains a money market account that pays 1 percent per quarter pergueren all short-term short-term deposits Gary has asked you to prepare a cash budget and short-term financial plan for the company under the current policies. He has also asked you to prepare additional plans based on changes in several inputs QUESTIONS 1. Use the numbers given to complete the cash budget and short-term financial plan 2. Rework the cash budget and short-term financial plan assuming Pieper changes to a targethal ance of 50,000 01 02 03 04 PIEPKORN MANUFACTURING Cash Budget 01 02 03 Begance Netshow 04 Muchance Cum
