Precision
Machines Part 1
Note:There are two parts to this learning team
assignment; Part 2 will be completed in Week 5.
Review the Learning Team Assignment due in Week
5.
Identify sources of information about cash
management strategies and preparation of cash budgets to be used in the
Precision Machines analysis due in Week 5.
Developa 700-word annotated bibliography using at least
3 resources.
Formatyour bibliography consistent with APA
guidelines.
Clickthe Assignment Files tab to submit your
assignment.
Read
the following case study:
Precision
Machinesis preparing a financial
plan for the next six months to determine the financial needs of the company.
The historical analysis of the company’s sales shows that the company’s total
sales are 30% cash sales and 70% credit sales.Further analysis of credit sales shows that the
company receives 50% of the credit sales one month after the sale and the
remaining 50% in the second month after the sale. This means the cash
collections from sales are 30% in the first month of the sale, 35% in the
second month, and 35% in the third month.
The materials purchased
by the company amounts to 50% of the sales for the month.The company pays for the purchases one month
after the initial purchase. The company likes to maintain a cash balance of
$5,000. The cost of borrowing is 10%.The company plans to pay off the loan whenever there is a surplus
and borrow when there is a deficit.
The attached spreadsheet
shows revenues (sales), expenses, capital expenditures, and other expenses for
Precision Machines’ next six months.Using the information given above and contained in the
spreadsheet, prepare a cash budget for January through June and determine the
cash surplus, deficit, and the financing needs of the company. In the
Recommendations section of the spreadsheet, insert your recommendation of a
cash management strategy for the company that will minimize the financing cost
and increase the cash flows for the company. Additionally,identifytwo economic and market forces
that may impact the financial plan for this company.
