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The company currently has a cash balance of $ 1 7 0 , 0 0 0 , and it plans to purchase new machinery in
The company currently has a cash balance of $ and it plans to purchase new machinery in the third quarter at a cost of
$ The purchase of the machinery will be made with cash because of the discount offered for a cash purchase. Adam
wants to maintain a minimum cash balance of $ to guard against unforeseen contingencies. All of Keafer's sales to
customers and purchases from suppliers are made with credit, and no discounts are offered or taken.
The company had the following sales each quarter of the year just ended:
After some research and discussions with customers, you're projecting that sales will be percent higher in each quarter next
year. Sales for the first quarter of the following year are also expected to grow at percent. You calculate that Keafer currently
has an accounts recelvable period of days and an accounts recelvable balance of $ However, percent of the
accounts receivable balance is from a company that has just entered bankruptcy, and it is likely that this portion will never be
collected.
ou've also calculated that Keafer typically orders supplies each quarter in the amount of percent of the next quarter's
rojected gross sales, and suppliers are paid in days, on average. Wages, taxes, and other costs run about percent of
ross sales. The company has a quarterly interest payment of $ on its longterm debt. Finally, the company uses a local
ank for its shortterm financial needs. It currently pays percent per quarter on all shortterm borrowing and maintains a
oney market account that pays percent per quarter on all shortterm deposits.
dam has asked you to prepare a cash budget and shortterm financial plan for the company under the current policies. He has
so asked you to prepare additional plans based on changes in several inputs.
Use the numbers given to complete the cash budget and shortterm financial plan.
Rework the cash budget and shortterm financial plan assuming Keafer changes to a minimum cash balance of $
Rework the sales budget assuming an percent growth rate in sales and a percent growth rate in sales. Assume a
$ target cash balance.
Assuming the company's sales grow at percent, what target cash balance would result in a zero need for shortterm
financing? To answer this question, you may need to set up a spreadsheet and use the "Solver" function.
You have looked at competitors' credit policies and have determined that the industry standard credit policy is net
The interpretation of these credit terms is that a purchaser will receive a percent discount on sales if it pays within days.
If the purchaser does not pay within days, the full sales price is due in days. You want to examine how a switch to this
credit policy would affect your cash budget and shortterm financial plan. If this credit policy is implemented, you estimate
that percent of all customers will take advantage of it and the accounts recelvable period will decline to days. Rework
the cash budget and shortterm financial plan under the new credit policy and a minimum cash balance of $ What
interest rate is implied by the credit terms?
You have talked to the company's main supplier about the credit terms Keafer receives. The supplier has stated that it would
be willing to offer new credit terms of net The interpretation of these credit terms is that Keafer will receive a
percent discount on sales if it pays within days. If it does not pay within days, the full sales price will be due in days.
What interest rate are the suppliers offering the company? Rework the cash budget and shortterm financial plan assuming
you take the credit terms on all orders and the minimum cash balance is $
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