finance assignment

FN2640: Week 4 Management and Financing

Analysis 4.2/Short-Term Financing

1

Use the information below for this assignment. Comfin Company has estimates on its level of current

and total assets for the next two years:

Year 201X Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

Total Assets

$500, 000

$475, 000

$460, 000

$470, 000

$475, 000

$485, 000

$495, 000

$555, 000

$600, 000

$650, 000

$700, 000

$750, 000

Current Assets

$250, 000

$220, 000

$199, 900

$204, 698

$204, 392

$208, 980

$213, 459

$262, 829

$307, 085

$351, 227

$395, 251

$439, 156

Year 201X +

1 Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

Total Assets

$600, 000

$570, 000

$552, 000

$564, 000

$570, 000

$582, 000

$594, 000

$660, 000

$720, 000

$780, 000

$840, 000

$900, 000

Current Assets

$350, 000

$350, 000

$352, 100

$359, 302

$365, 608

$373, 020

$380, 541

$397, 171

$412, 915

$428, 773

$444, 749

$460, 844

a. Estimate the levels of permanent and temporary current assets for Comfin over these months.

Find the average amount for fixed assets, permanent current assets, and temporary current

assets in the year 201X and year 201X + 1.

b. What average amounts of short-term and long-term financing should Comfin have during each

year if it wants to follow a maturity-matching financing strategy over time?

c. What average amounts of short-term and long-term financing should Comfin have during each

year if it wants to follow an aggressive financing strategy over time?

d. Suppose Comfin’s cost of short-term funds is 8 percent and its cost of long-term funds is 15

percent. Use your answers in (b) and (c) to compute the cost of each strategy.

e. What are the pro and con arguments toward each strategy in terms of profitability, risk, and

company liquidity?

Source textbook: Melicher, R. W., & Norton, E. A. (2011). Introduction to finance: Markets,

investments, and financial management (14th ed.). Hoboken, NJ: John Wiley.

Submission Requirements:

Answer each problem in detail with a conclusion and results.

Submit your answer in a Microsoft Excel file, showing step-by-step solutions to all calculations.

Evaluation Criteria:

You will be evaluated on the following points using the rubric for your performance in this

assessment:

Did you accurately calculate the permanent and temporary current assets?

Did you correctly recommend average amounts of short-term and long-term financing

required?

FN2640: Week 4 Management and Financing

Analysis 4.2/Short-Term Financing

2

Did you compute the cost of each strategy?

Did you explain the pros and cons of each strategy in terms of profitability, risk, and company

liquidity?

Click here to download the rubric that will be used to evaluate this analysis.