Principles of Corporate Finance

A Short Term Financing Plan

Example -
Dynamic
Mattress
Company-
Financing PlanFinancing Plan

New borrowing 1st 2nd 3rd 4th

1. Line of credit2. Stretching payables 41.03.6 20.00.0 0.00.0 0.00.0
   Repayments3. Total 44.6 20.0 0.0 0.0


2. Line of credit5. Stetched payables 0.00.0 0.03.6 20.04.8 36.20.0


3. Total7. Net new borrowing 44.60.0 16.43.6 -24.824.8 -36.236.2


4. Plus securities sold9. Less securities bought 5.00.0 0.00.0 0.00.0 0.00.0
   Interest payments:10. Total cash raised 49.6 16.4 -24.8 -36.2


5. Line of credit12. Stretching payables 0.00.0 1.20.2 1.21.0 1.00.0


6. Less interest on securities14. Net interest paid -0.1-0.1 0.01.4 0.02.2 0.01.0


7. Funds for Compensating balances16. Cash required for operations 46.53.2 15.00.0 -1.00.3 -35.0-2.2


8. Total cash required 49.6 16.4 -24.8 -36.2