Spencer Sporting Goods Cash Budgeting

Monday, Oct. 10 — Cash Budgeting

Prepare: Spencer Sporting Goods

a) What business is Spencer in? Who are his suppliers? Who are his customers? What is your assessment of his competitive position?

b) Why does this profitable company need funding?

c) How much funding does Spencer need? Prepare an Excel spreadsheet with 5-year pro forma income statement and balance sheet to show Spencer's cash needs.

d) Suppose you are advising Mr. Spencer. What changes would you recommend he make to improve his business and its financial condition. You may consider both changes to operations as well as strategies for Mr. Spencer to finance his operations. In making your recommendations, assume that the bank will not loan Mr. Spencer more than 60% of his accounts receivable balance.

e) Prepare an Excel spreadsheet with a 5-year annual pro forma income statement and balance sheet for Spencer Sporting Goods to show how your changes affect Spencer Sporting Good's financial condition. Using EVA analysis, show that your changes add value to Spencer Sporting Goods. Assume Spencer Sporting Goods' total cost of capital is 15%.

Wednesday, Oct. 12 – Cash Budgeting

Graded Assignment I due at start of class today.

Please submit your balance sheet for December 31, 1979 and income statement for the four month period, September through December 1979, requested in question b below.

Prepare: Hampton Machine Tool Company 9-280-103 Rev. 12/3/91

a) What is Hampton's competitive position in the market place? Who are their suppliers? Who are the customers?

b) Why did Hampton repurchase a substantial fraction of its outstanding common stock? What is the impact of this repurchase on Hampton's financial performance?

c) Why can't a profitable company like Hampton repay its loan on time and why does it need more bank financing? What major developments between November 1978 and August 1979 have contributed to this situation?

d) Based on the information in the case, prepare a (single) projected