Medieval Adventures Company

Medieval Adventures Company

A review of this company financial statement shows the difference between profits and cash flow from operations. Medieval Adventures pays expenses when it is incur and takes up to 60 days to receive cash from the sales on its units. One possible solution is to match supplier’s credit terms with customers’ credit terms. For example, Medieval Adventures sells its unit on credit allowing customers to have credit terms of 60 days. I would recommend the owners of Medieval to negotiate 30 or 60 days credit terms with their own suppliers. By matching credit terms with the supplier and customers, the company won’t be so desperate for cash to call the boss to come and resolve the problem. Another solution would of being to offer discount credit terms of 2/28 to give the customers incentives to pay of the invoices faster. One thing the company could have done in the beginning of fiscal year was to create a profit plan to have planned for the cash strapped months.

1. Starting from the Months of May through August, Medieval will need to acquire some type infusion of Cash. Medieval could raise cash through a Bank Loan paying a pre-arranged interest rate or they can also selling their accounts receivable through a factoring company. Medieval will need a cash infusion of $40,000.

2. The company is having cash problems because of the 60 day credit terms they offer their customers. Medieval pays expenses when occurs, and it takes 60 days to collect the cash from the sales of their product. This could have been avoided if the owner created a profit plan to account for the credit terms of 60 days.