You have recently been hired by Middleton Manufacturing to work in the newly established treasury department....

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 short-term 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:

Gross sales Q1 1,360,000 Q2 1,440,000 Q3 1,500,000 Q4 1,600,000

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 the 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 (including interest)
*Short term investment - ending*

Short term borrowings - beginning
Interest paid
New short-term borrowings
Short term borrowings repaid (including interest)
*Short term borrowings - ending*

Expert Solution

ekkarill92 answered 2 years ago

You have recently been hired by Piepkorn Manufacturing to work in a newly established treasury department....

You have recently been hired by Piepkorn Manufacturing to work in a newly established treasury department. Piepkorn Manufacturing is a small company that produces cardboard boxes in a variety of sizes for different purchasers. Gary Piepkon, the owner of the company, works primarily in the sales and production areas of the company. Currently, the company puts all receivables in one shoe box and all payables in another. Because of the disorganized system, all finance area needs work, and that’s what...

WORKING CAPITAL MANAGEMENT You have recently been hired to work in your company’s newly established treasury...

WORKING CAPITAL MANAGEMENT You have recently been hired to work in your company’s newly established treasury department. The company is a small company that produces cardboard boxes in a variety of sizes for different purchases. The owner of the company, works primarily in the sales and production areas of the company. Currently, the company puts all receivables in one shoe box and all payables in another. Because of the disorganized system, the finance area needs work – and that’s what...

Mini Case – Cash budget and Short-term financial planning Middleton Manufacturing You have recently been hired...

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...

Question 2 You work in the treasury department of a manufacturing company and have been tasked...

Question 2 You work in the treasury department of a manufacturing company and have been tasked to prepare a short-term financial plan for the coming year. The projected sales forecasts for the next five quarters are, respectively, $210m, $180m, $245m, $280m, and $240m. The firm sells on credit and takes, on average, 30 days to collect from its customers; $68m in receivables are currently outstanding. Also, the firm orders a quarter in advance on credit—purchases in a given quarter is...

KEASER MANUFACTURING WORKING CAPITAL MANAGEMENT You have recently been hired by Keaser Manufacturing to work in...

KEASER MANUFACTURING WORKING CAPITAL MANAGEMENT You have recently been hired by Keaser Manufacturing to work in its established treasury department. Keaser Manufacturing is a small company that produces highly customized cardboard boxes in a variety of sizes for different purchasers. Adam Keaser, 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...

KEASER MANUFACTURING WORKING CAPITAL MANAGEMENT You have recently been hired by Keaser Manufacturing to work in...

KEASER MANUFACTURING WORKING CAPITAL MANAGEMENT You have recently been hired by Keaser Manufacturing to work in its established treasury department. Keaser Manufacturing is a small company that produces highly customized cardboard boxes in a variety of sizes for different purchasers. Adam Keaser, 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...

You have recently been hired by Bio Lux Company, in its relatively new treasury management department....

You have recently been hired by Bio Lux Company, in its relatively new treasury management department. Bio Lux was founded five years ago by Jessica Parker. Jessica found a method to produce high quality shampoo using natural ingredients. The shampoo produced by Bio Lux is in a good position to compete with other more established shampoo producers. The company is privately owned by Jessica Parker and her family, and it had sales of $12 million last year. Bio Lux primarily...

You have recently been hired by Bio Lux Company, in its relatively new treasury management department....

You have recently been hired by Bio Lux Company, in its relatively new treasury management department. Bio Lux was founded five years ago by Jessica Parker. Jessica found a method to produce high quality shampoo using natural ingredients. The shampoo produced by Bio Lux is in a good position to compete with other more established shampoo producers. The company is privately owned by Jessica Parker and her family, and it had sales of $12 million last year. Bio Lux primarily...

You have been recently hired in the human resources department at the company you have always...

You have been recently hired in the human resources department at the company you have always dreamed of working for. At the end of your first day, your manager, I. M. DeBoss, on her way out of the office says to you: “So Mr./Ms. Jones, what things come to mind when you think of the word “ethics”? Before you can answer, she asks you if you believe ethics are important for a company and if so why do you feel...

You have been recently hired in the human resources department at the company you have always...

You have been recently hired in the human resources department at the company you have always dreamed of working for. At the end of your first day, your manager, I.M. DeBoss, on her way out of the office says to you: “So Mr./Ms. Jones, what things come to mind when you think of the word 'ethics'?" Before you can answer, she asks you if you believe ethics are important for a company and if so why do you feel that...

Question

You have recently been hired by Middleton Manufacturing to work in the newly established treasury department....

Solutions

Expert Solution

Related Solutions

You have recently been hired by Piepkorn Manufacturing to work in a newly established treasury department....

WORKING CAPITAL MANAGEMENT You have recently been hired to work in your company’s newly established treasury...

Mini Case – Cash budget and Short-term financial planning Middleton Manufacturing You have recently been hired...

Question 2 You work in the treasury department of a manufacturing company and have been tasked...

KEASER MANUFACTURING WORKING CAPITAL MANAGEMENT You have recently been hired by Keaser Manufacturing to work in...

KEASER MANUFACTURING WORKING CAPITAL MANAGEMENT You have recently been hired by Keaser Manufacturing to work in...

You have recently been hired by Bio Lux Company, in its relatively new treasury management department....

You have recently been hired by Bio Lux Company, in its relatively new treasury management department....

You have been recently hired in the human resources department at the company you have always...

You have been recently hired in the human resources department at the company you have always...