In this case study, we prepared a monthly cash budget, daily cash budget, and various sensitivity analysis in order to persuade a bank to offer a credit line to Alpine Wear, of approximately $350,000. Because of a recent tightening of credit, bankers have been asking clients to estimate borrowing needed for the rest of the current year, 2000, and the first half of 2001. Therefore, we have created a monthly cash budget January-June, and a daily cash budget for all of January. We are hoping to receive a credit line of about $350,000. However, some background information may be needed in order to do so.
Alpine Wear is a company that operates seven days a week. They have strict sale policy of 2/10, net, 30. In other words, if it the account is
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This borrowing is not shown specifically at the beginning when it took place. Therefore, the budget can not accurately forecast financing needs. If the outflows were clustered at the beginning of the month and collections were heaviest towards the end of the month, it would understate the funds needed. In order to correct inaccuracies Alpine Wear should make a daily budget for the actual cash control. Daily cash budgets are more essential as they make sure the company has the cash on hand and loans are satisfactory enough to meet actual, daily, cash needs, not …show more content…
An example of such would be U. S. Treasury bills and Commercial Paper. U.S. Treasury bills are default free, mature between 91 days to a year, and have a rate of return of 0.07%. CP has a low default risk, matures up to 270 days, and a rate of return at 0.17%.
If a company had cash balances in the millions compared to Alpine, i would suggest to invest in instruments with a bigger rate of return because they have the flexibility to risk some cash without damaging its operations. Examples of such instruments would be, common stocks, preferred stocks, and even possibly corporate bonds.
Liquidity becomes less of an issue if forecasts showed cash surpluses for all future months, going out indefinitely. However, one should consider that shorter investments do not usually yield as much as longer
DuPont has been known for its low reliance on borrowings. In the 1970’s, the company had to assume a substantial portion of debt of Conoco, a newly acquired company. In 1983, the managers have to decide about the future optimal target debt ratio. Should the company continue to keep about 40% of its assets financed via debt or should it strive to lower its borrowings to 25%?
...o renegotiate credit agreements with banks. However, the liquidity was a result of structural changes and would not bring significant effect to the company because it is unusual and infrequent (the extraordinary credits of $15 million fall in this category also). The financial report must be consistent year-by-year. A company should do the same or similar activities, especially operating activities, to generate “money” every year and recognize “money” as its profit. However, this is not the case for Harnischfeger. We are doubtful that the company will perform well in the future. The company recorded modest profit this year because it reduced operating cost not because it increased operating revenue. Since Harnischfeger did not generate its profit by operating activity, it would be too risky to predict if its stock price will reach $6.00 per share in the 1986-87.
“A Worn Path,” written by Eudora Welty, is a story about an old lady, Phoenix Jackson who faces obstacles of a poor life during the most repressed era of American History - The Great Depression. Poor colored people of the south “like Phoenix, they endured an endless struggle, if not against scurrying hogs, then against the thorny bush” explains what life is life during a racial charged time living in the south (Sykes 151). Phoenix Jackson overcomes negativity, difficulty, and impatience; yet, never loses sight of the importance of her biannual worn path to get medicine for her sick grandson.
Northrup National Bank should extend the loan to Butler. The company will roll much of its existing debt into the new loan, without extending itself significantly further than it currently is, and at a more favorable rate. Butler has been successful in keeping current on its debts, and based on projections should have the means to start paying these debts down. From the bank’s perspective, there’s little risk involved. With the industry expected to grow so much in the next year, Butler will be in a strong position, and potentially interested in borrowing more at the end of 1991.
2 Investment time frames: The time for which one wants to stay invested has an impact on the risk that one can take. Investors with a longer time horizon may feel comfortable taking on riskier or more volatile investments. Those with a shorter time horizon may prefer to take on less risk. Also, if one needs to withdraw money relatively soon, he may consider having a higher percentage of your investments in cash than investing in equity or fixed income securities
In this case analysis I will first show the requirements the company had for its financing. Then I will
In 1996, Under Armour,Inc. (UA) was founded by Kevin Plank as a former University of Maryland football player. Kevin Plank started his business with the idea of alteration athlete’s T-shirt. The shirt uses moisture-wicking fabrics to keep athletes cool and dry, and worked in a body to regulate temperature for enhancing athlete performance (Under Aumour, “About Under Armour” n.d.). Under Armour’s mission statement is to make all athletes better through passion, design and the relentless pursuit of innovation (Under Aumour, “Brand Mission”n.d.). Under Armour has developed different product for athletes to use in different seasons for men, women, and youth such as HeatGear that is designed to be worn in high temperatures, ColdGear, which is designed to be wore when the body circulate body heat from hotspot to the normal body temperatures, and AllSeasonGear, which is designed for wearing in changing temperatures (Under Aumour, “About Under Armour” n.d.). Under Armour develops, markets, distributes its apparels, footwear, and accessories for using in the athletics in various continents such as North America, Asia, Europe, the Middle East, and Africa. It is looking for expanding market in the future (Under Aumour, “Shop of Under Armour”n.d.). Under Armour’s headquatered is in Baltimor, MD. Moreover, it also operates in Canada, the United Kingdom, Australia and other 80 countries (Under Aumour, “Find a Retailer”n.d.). It distribute its products through retail stores and online.
There is a range of criteria relevant for a decision of financing a new venture. To construct my list for the evaluation of a new company as an opportunity I have selected to refer to t...
While analyzing the data for The Body Shop International case, I noticed some trends and have compiled my assumptions for the next three years. I have compiled pro-forma statements for the fiscal years 2002, 2003 & 2004. These figures are based on the percentage of sales method for pro-forma financial modeling. Simply put, I used the sales figures from the past three years 1999, 2000 & 2001 and applied a growth rate of 13% increase to sales. Below are some additional assumptions that I have created to illustrate how the firm can become profitable while increasing market share and maintaining stockholder interest within the firm over the next three years.
Debt capital refers to money borrowed. Examples of this include bonds and short-term commercial paper. Bonds are more widely used because it provides a company with years to come up with the principal while paying interest only. Bonds are rated (i.e. AAA, AA, BB, etc.), these ratings correspond to the risk of default. The higher the rating, the lower likelihood of default and therefore a lower interest rate accepted by the lender. Short-term commercial paper is typically...
Many of individual stocks, mutual funds or index funds that met specific asset class needs. It also should be compare the costs associated with each types of investment. Index funds is a strong choice compare with any other asset class because minimize cost while outperform most of competitive active funds.
I had a good personal experience when I was 8 years old. It was when I went skiing for the first time and I absolutely loved it. When I went skiing for the first time I had to go to ski school because that’s how people learn to ski. When I went there they taught us how to go down a slope and how to turn. This experience highlights that when some people do something if they like it they might want to do it for the rest of their life. Skiers need certain knowledge about skiing such as how to get and maintain success, how professional skiers work, how to overcome failures, and how to achieve Olympic level skill so they can have fun as they become more professional.
Corporate liquidity can be affected by the interim shocks to cash flows, alongside the availability of cash reserves. On the other hand, solvency’s main concerns can be expressed by the financial leverage and average future profitability uncertainty. These relations indicate that there is two ways for a firm to enter financial distress. First, a company can become illiquid after a weak interim cash flow or it can become insolvent if the predicted rate of the cash flow decline
Many organizations have maximized the use of cash on hand by effective cash management techniques and the use of short-term financing. This paper will discuss various cash management techniques and short-term financing methods used by organizations.
According to Agamata (2013) cash budget is an indispensable tool in managing cash flow. Cash flow management magnifies the inevitable relevance of budgeted cash flow for a year. This budget provides working details on when is cash greater than the need for the period and when is additional cash needed to sustain the liquidity requirements for a given period. Cash flows management predetermines the excess cash inflow and deficit in a given period.