Question

Webdisk kauneus fi piepkorn manufacturing working capital management solution

Answer 1

Explanation:

PIEPKORN MANUFACTURING WORKING CAPITAL MANAGEMENT, PART 2

After completing the short-term financial plan for next year (at the end of Chapter 16), Gary Piepkorn approaches you and asks about the company’s credit policy. In looking at the competition, most companies in the industry offer credit to customers, so Piepkorn Manufacturing appears to be one of the few companies that does not. Several customers have expressed the possibility of changing to a different supplier because of the lack of credit. Gary is interested in knowing how implementing a credit policy will affect the short-term financial plan for next year. Additionally, he would like you to inquire as to the possibility of getting improved credit terms for the company’s purchases.

To analyze the possible switch to the new credit terms, Gary has asked you to investigate industry standard credit terms and rework the short-term financial plan assuming Piepkorn Manufacturing offers credit to its customers. He would also like to investigate how better credit terms from the company’s suppliers would affect the short-term financial plan.

You have looked at the credit policy offered by your competitors and have determined that the industry standard credit policy is 1/10, net 45. The discount will begin to be offered on the first day of the year. You want to examine how this credit policy would affect the cash budget and short-term financial plan. If this credit policy is implemented, you believe that 60 percent of customers will take advantage of the credit offer and the accounts receivable period will be 24 days. Rework the cash budget and short-term financial plan under the new credit policy and a target cash balance of $80,000. What interest rate are you effectively offering customers?

$\{implies}$ Complete the cash budget and the short-term financial plan for the company assuming that the company’s policy is to maintain a minimum cash balance of $80,000.

First, calculate the net sales knowing that 60 percent of all sales will take advantage of the 1 percent discount when the bill is paid within 10 days. Thus, in order to calculate the net sales we need to multiply 40 percent of sales by 0.99 (1 percent discount) plus the remaining 60 percent of sales.

Answer 2

Answer -

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• Answer to Piepkorn Manufacturing Working Capital Management, Part 1 You have recently been hired by Piepkorn Manufacturing.

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