You have recently been hired by Keafer Manufacturing to work in its established treasury department. Keafer Manufacturing is a small company that produces highly customized cardboard boxes in a variety of sizes for different purchasers. Adam Keafer, the owner of the company, works primarily in the sales and production areas of the company. Currently, the company basically puts all receivables in one pile and all payables in another, and a part$-$time bookkeeper periodically comes in and attacks the piles. Because of this disorganized system, the finance area needs work, and that$$s what you$$ve been brought in to do$.$

The company currently has a cash balance of $$210,000$ and it plans to purchase new machinery in the third quarter at a cost of $$390,000.$ 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 $$135,000$ to guard against unforeseen contingencies. All of Keafer$$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:

Gross sales

Q$1$ $$1,102,000$

Q$2$ $$1,141,000$

Q$3$ $$1,125,000$

Q$4$ $$1,063,000$

After some research and discussions with customers, you$$re projecting that sales will be $8$ percent higher in each quarter next year. Sales for the first quarter of the following year are also expected to grow at $8$ percent. You calculate that Keafer currently has an accounts receivable period of $57$ days and an accounts receivable balance of $$675,000.$ However, $10$ 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.

You$$ve also calculated that Keafer typically orders supplies each quarter in the amount of $50$ percent of the next quarter$$s projected gross sales and suppliers are paid in $53$ days, on average. Wages, taxes, and other costs run about $25$ percent of gross sales. The company has a quarterly interest payment of $$185,000$ on its long$-$term debt. Finally, the company uses a local bank for its short$-$term financial needs. It currently pays $1\mathrm{.}2$ percent per quarter on all short$-$term borrowing and maintains a money market account that pays $\mathrm{.}5$ percent per quarter on all short$-$term deposits.

Adam has asked you to prepare a cash budget and short$-$term financial plan for the company under the current policies. He also has asked you to prepare additional plans based on changes in several inputs.

$1.$ Use the numbers given to complete cash budget and short term financial plan.

$2.$ Rework the cash budget and short term financial plan assuming Keafer changes to a minimum cash balance of $$90000.$

$3.$ Rework the sales budget assuming an $11$ percent growth rate in sales and a $5$ percent growth rate in sales. Assume a $$135,000$ target cash balance.

$4.$ Assuming the company maintains its target balance at $$135000,$ what sales growth rate would result in a zero need for short term financing? To answer this question, you may need to set up and use the "Solver" function.