Learning Team: Precision Machines Part 2

Purpose of Assignment

In Week 5, students will complete the second part of their Precision Machines Learning Team assignment. They will analyze the documents created for them and recommend a management strategy for the company, Precision Machines, which will minimize the financing cost and increase cash flows. Students will also create a spreadsheet to show their calculations. This will help students gain tangible financial analysis skills to take with them into their careers.

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.

Resources Required

Finance Chapter 11; Finance Chapter 12; Finance Chapter 13, Precision Machines documents

Grading Guide

Content

Met

Partially Met

Not Met

Comments:

Develop a 1225-word strategic analysis.

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.

Total Available

Total Earned

14

#/X

Writing Guidelines

Met

Partially Met

Not Met

Comments:

The paper — including tables and graphs, headings, a title page, and a reference page — is consistent with APA formatting guidelines and meets course-level requirements.

The paper includes properly cited intellectual property using APA style in-text citations and a reference page.

The paper includes paragraph and sentence transitions that are logical and maintain flow throughout the paper.

The paper includes sentences that are complete, clear, and concise.

The paper follows proper rules of grammar and usage including spelling and punctuation.

Total Available

Total Earned

6

#/X

Assignment Total

#

20

#/X

Additional comments: