Funding Activity Analysis

Assignment #5  Updated

Use the companion Excel spreadsheet as a template to do this assignment.  When you are finished, UPLOAD your Excel spreadsheet into Blackboard.

As Treasurer, you are responsible for ensuring adequate funding of trading activity.  Therefore, new deals require your approval before traders execute.  Currently, you have funding capacity of $180MM to fund trades and unexpected cash needs.  Below is a portfolio of trades awaiting approval to execute.  Decide which trades you will approve in order to obtain the most profitable position for your company while staying within limits and adhering to policies. 

1. The best way to begin the analysis would be to set up columns with the 5 trades and the capital needed each day.  (See the companion Excel spreadsheet.) Then calculate the total funding needed each day if you did all 5 trades.    
2. If you can do all 5 trades and not exceed your funding limits, you are done and should fund all 5 trades.  On the other hand, if you exceed your limits, figure out which combination of trades would give you the highest expected profit without going over your limit (i.e. is it trades 1,2,3,4 or 2,3,4,5 or 1,2,4,5 or 1,2,3,5 or 3,4,5?).

Deal 1: Buy Naphtha cargo from USGC, ship to Europe, and sell at destination

Cash Out                         10/28/2021                                   Cash needed per day       $16MM

Cash In                             11/17/2021                                   Expected Profit               $0.5MM

Cash Timeframe           20 days                                                        

Deal 2: Buy Jet cargo in USGC and sell in Latin America

Cash Out                         10/28/2021                                   Cash needed per day       $30MM

Cash In                             11/7/2021                                     Expected Profit               $0.2MM

Cash Timeframe           10 days                                                        

Deal 3: Buy Fuel Oil cargo in Europe, ship product to Singapore, and sell at destination

Cash Out                         10/10/2021

Cash In                             12/29/2021

Cash Timeframe           80 days

Cash needed per day  $58MM

Expected Profit             $2.0MM

Deal 4: Buy Fuel Oil cargo in Europe, ship product to Singapore, and sell at destination

Cash Out                         9/21/2021                                     Cash needed per day       $67MM

Cash In                             11/20/2021                                   Expected Profit               $1.4MM

Cash Timeframe           60 days                                                        

Deal 5: Buy Crude Oil inventory, store on ship for 4 months, and sell in Asia

Cash Out                         10/1/2021                                     Cash needed per day       $70MM

Cash In                             1/24/2022                                     Expected Profit              $3.0MM

Cash Timeframe           115 day