Explain two economic and market forces that will impact the financial plan of this company.

Precision Machines    November,December,January,February,March,April,May and June Annual Cost of borrowing10.00%        Minimum Cash Balance$5,000.00        Beginning Cash Balance$7,500.00        Revenues (Sales)$40,000.00$50,000.00$48,000.00$55,000.00$35,000.00$50,000.00$65,000.00$40,000.00 Cash Collections November,December,January,February,March,April,May,June,First Month  (30%)0.3$12,000.00$15,000.00$14,400.00$16,500.00$10,500.00$15,000.00$19,500.00$12,000.00Second Month  (35%)0.3514,000.0017,500.0016,800.0019,250.0012,250.0017,500.0022,750.00Third Month  (35%)0.3514,000.0017,500.0016,800.0019,250.0012,250.0017,500.00Total Collections29000.00$45,900.00$50,800.00$46,550.00$46,500.00$49,250.00$52,250.00Cash Disbursements         Material Purchases0.5$20,000.00$25,000.00$24,000.00$27,500.00$17,500.00$25,000.00$32,500.00Salaries6,000.006,000.006,000.006,000.006,000.006,000.00Wages3,000.003,500.003,000.003,200.003,500.003,000.00Other Expenses  Capital Expenditure45,000.00  Dividends1,000.001,000.00  Interest35.42Total Disbursements$34,000.00$33,500.00$82,500.00$26,735.42$34,500.00$42,500.00Cash flows         Net cash flows$11,900.00$17,300.00($35,950.00)$19,764.58$14,750.00$9,750.00Cumulative cash flows$19,400.00$36,700.00$750.00$20,514.58$35,264.58$45,014.58Minimum Cash Balance$5,000.00$5,000.00$5,000.00$5,000.00$5,000.00$5,000.00Cash Surplus or (Deficit)$14,400.00$31,700.00($4,250.00)$15,514.58$30,264.58$40,014.58  Recommendations:

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 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 1000-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.

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