Reference no: EM131107646
Read the following case study:
Precision Machines is 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 on the spreadsheet, prepare a cash budget for January through June and determine the cash surplus, deficit, and the financing needs of the company.
Review the "Precision Machines" document and spreadsheet.
Prepare a cash budget for Precision Machines in Microsoft Excel.
Create a 1,225-word strategic analysis and include the following:
• Recommend a cash management strategy for the company that will minimize the financing cost and increase the cash flows for the company.
• Explain two economic and market forces that will impact the financial plan of this company.
Format your documents consistent with APA guidelines.
Attachment:- Case_Study_Team_Project.xls
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