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Assignment 2: Course Project—Genesis Cash Budget ReportThe Genesis operations management team is now preparing to implement the operating expansion plan....
Assignment 2: Course Project—Genesis Cash Budget Report
The Genesis operations management team is now preparing to implement the operating expansion plan. Previously the firm’s cash position did not pose a challenge. However, the planned foreign expansion requires Genesis to have a reliable source of funds for both short-term and long-term needs.
One of Genesis’s potential lenders tells the team that in order to be considered as a viable customer, Genesis must prepare and submit a monthly cash budget for the current year and a quarterly budget for the subsequent year. The lender will review the cash budget and determine whether or not Genesis can meet the loan repayment terms. Genesis’s ability to repay the loan depends not only on sales and expenses but also on how quickly the company can collect payment from customers and how well it manages its supplier terms and other operating expenses. The Genesis team members agreed that being fully prepared with factual data would allow them to maximize their position as well as negotiate favorable financing terms.
The Genesis management team held a brainstorming session to chart a plan of action, which is detailed here.
Evaluate historical data and prepare assumptions that will drive the planning process.
Produce a detailed cash budget that summarizes cash inflow, outflow, and financing needs.
Identify and compare interest rates, both short-term and long-term, using debt and equity.
Analyze the financing mix (short/long) and the cost associated with the recommendation.
Since this expansion is critical to Genesis Corporation expanding into new overseas markets, the operations management team has been asked to prepare an executive summary with supporting details for Genesis’s senior executives.
Working over a weekend, the management team developed realistic assumptions to construct a working capital budget.
Sales: The marketing expert and the newly created customer service personnel developed sales projections based on historical data and forecast research.
Other cash receipt: Rental income $15,000 per month.
Production material: The production manager forecasted material cost based on cost quotes from reliable vendors, the average of which is 50 percent of sales.
Other production cost: Based on historical cost data, this cost on an average is 30 percent of the material cost and occurs in the month after material purchase.
Selling and marketing expense: Five percent of sales
General and administrative expense: Twenty percent of sales
Interest payments: Payable in December – $75, 000
Tax payments: Quarterly due 15th of April, July, October, and January – $15,000
Minimum cash balance desired: – $ 25,000 per month
Cash balance start of month (December):$15,000
Available short-term annual interest rate is 8 percent, long-term debt rate is 9 percent, and long-term equity is 10 percent. All funds would be available the first month when the firm encounters a deficit.
Dividend payment: None
Based on this information, do the following:
Using the Cash Budget spreadsheet, calculate a detailed company cash budget for the forthcoming year. Summarize the sources and uses of cash, and identify the external financing needs for the forthcoming two (2) years.
Cash Budget
Download this Excel spreadsheet to view the company’s cash budget. You will calculate the company’s cash budget for the forthcoming year using this information.
In an executive-level report, summarize the company's financing needs for the forecast period and provide your recommendations for financing the planned activities. Be sure to comment on the following:
a) Your recommended financing solution and cost to the firm: If Genesis needs operating cash, how should it fund this need? Are there internal policy changes with regard to collections or payables management you would recommend? What types of external financing are available?
b) Your concerns associated with the firm's cash budget. Is this a sign of weak sales performance or poor cost control? Why or why not?
Answer rating (rated 4 times)
the answer is in excel file, and there is a 2 page write up that explains the excel sheet.
body preview (48 words)
xxxxx xxx x excel xxxxx The xxxx xxxx original data has sales figures xx xxxxx xx question for quarterly budget as 150000. xxxx xxxxxxxx xxxxx so I have xxxxx x xxxx zero and solved. it.
xxx write up xx xx help you xxxxxxxxxx xxx xxxxxxx xxxx in xxxxx xxxxxx
file1.xlsx preview (399 words)
xxxxxx
| xxxxxxx xxxx Budget xxxxxx | |||||||||||||||||
| Dec | xJan | xxxx | xxxxxx | xxxxxx | xxxx | xxxx | xJuly | xxx | xSept | xxxx | xNov | xDec | xxxxxx | June | xxxx | Dec | xMarch |
| xxxx Inflow | |||||||||||||||||
| xxxxxxx Balance | |||||||||||||||||
| xxxxx xxxxxxxxxx xxxxx | x300,000 | xxxxxxxx | x350,000 | x400,000 | x500,000 | 550,000 | x700,000 | xxxxxxx | xxxxxxx | 900,000 | xxxxxxxx | x750,000 | 500,000 | xxxxxxxxx | 1,900,000 | x3,000,000 | x2,400,000 |
| Cash Collections xx Sales | |||||||||||||||||
| 20% in month xx xxxx | xxxxxxx | xxxxxx | x70,000 | x80,000 | xxxxxxx | xxxxxxxx | x140,000 | xxxxxxx | x130,000 | xxxxxxx | 170,000 | 150,000 | 100,000 | xxxxxxx | x380,000 | 600,000 | x480,000 |
| xxx xx xxxxx month after sale | xxxxxxx | x60,000 | x105,000 | x120,000 | xxxxxxxx | xxxxxxxx | xxxxxxx | 210,000 | xxxxxxx | xxxxxxx | x255,000 | x225,000 | 450,000 | xxxxxxx | x900,000 | 720000 | |
| xxx in xxxxxx month after sale | x105,000 | xxxxxxx | xxxxxxx | xxxxxxxx | xxxxxxx | xxxxxxxx | x245,000 | xxxxxxx | xxxxxxx | 315,000 | 297,500 | xxxxxxx | 665,000 | x1050000 | x840000 | ||
| 40% in third month after xxxx | 120,000 | xxxxxxx | xxxxxxxx | xxxxxxx | 200,000 | xxxxxxx | 280,000 | x280,000 | x260,000 | x360,000 | 600,000 | xxxxxxx | |||||
| Other xxxx xxxxxxxx | 15,000 | 15,000 | 15,000 | xxxxxx | 15,000 | x15,000 | xxxxxx | x15,000 | xxxxxxx | xxxxxxx | xxxxxx | xxxxxxx | xxxxxxx | 45,000 | x45,000 | x45,000 | 45,000 |
| xxxxx xxxx Inflow | xxxxxxx | x145,000 | xxxxxxxx | x390,000 | xxxxxxx | 555,000 | x655,000 | x757,500 | xxxxxxxx | x915,000 | xxxxxxxx | xxxxxxx | xxxxxxxx | x345,000 | xxxxxxxx | x1,740,000 | 2,690,000 |
| xxxx Outflows | |||||||||||||||||
| Material xxxxxxxxx (reference xxxxx | xxxxxxxx | xxxxxxxx | xxxxxxxx | xxxxxxx | 250,000 | x275,000 | 350,000 | 350,000 | xxxxxxx | x450,000 | xxxxxxx | xxxxxxx | xxxxxxxx | 750,000 | 950,000 | x1,500,000 | xxxxxxxxxx |
| xxxxxxx xxx Material xxxxxxxx | |||||||||||||||||
| xxxx in month xxxxx xxxxxxxx | xxxxxxx | x100,000 | 175,000 | 200,000 | x250,000 | 275,000 | 350,000 | x350,000 | 325,000 | xxxxxxxx | xxxxxxx | xxxxxxxx | 250,000 | 750,000 | 950,000 | xxxxxxxxxx | xxxxxxxxxx |
| Other Cash Payments | |||||||||||||||||
| xxxxx production cost - - - more text follows - - - |
file2.xlsx preview (404 words)
xxxxxx
| Genesis Cash xxxxxx ($000) | |||||||||||||||||
| Dec | xJan | Feb | xxxxx | April | xxx | xJune | xxxxx | Aug | xxxxx | Oct | xxxx | xxx | March | xxxx | xSept | Dec | March |
| xxxx Inflow | |||||||||||||||||
| Opening Balance | |||||||||||||||||
| xxxxx (Reference only) | xxxxxxxx | xxxxxxxx | xxxxxxx | xxxxxxxx | xxxxxxx | xxxxxxxx | xxxxxxx | xxxxxxxx | xxxxxxx | xxxxxxx | 850,000 | 750,000 | xxxxxxxx | 150,000 | xxxxxxx | x3,000,000 | 2,400,000 |
| Cash xxxxxxxxxxx xx Sales | |||||||||||||||||
| xxx in month xx xxxx | xxxxxxx | xxxxxx | xxxxxxx | x80,000 | xxxxxxx | xxxxxxx | 140,000 | xxxxxxxx | x130,000 | 180,000 | xxxxxxx | xxxxxxxx | x100,000 | xxxxxx | 38,000 | x600,000 | xxxxxxx |
| xxx xx xxxxx xxxxx xxxxx sale | 90,000 | 60,000 | 105,000 | 120,000 | 150,000 | xxxxxxx | 210,000 | xxxxxxxx | xxxxxxx | xxxxxxx | 255,000 | x225,000 | xxxxxx | xxxxxxx | x900,000 | xxxxxx | |
| xxx xx xxxxxx xxxxx after sale | 105,000 | xxxxxxx | xxxxxxxx | 140,000 | 175,000 | xxxxxxx | xxxxxxx | xxxxxxxx | x227,500 | xxxxxxx | xxxxxxxx | 52,500 | xxxxxx | 1050000 | x840000 | ||
| xxx xx xxxxx xxxxx after sale | x120,000 | 80,000 | 140,000 | x160,000 | x200,000 | xxxxxxxx | xxxxxxxx | x280,000 | xxxxxxxx | xxxxxxxx | x60,000 | 76000 | |||||
| Other xxxx xxxxxxxx | x15,000 | xxxxxx | xxxxxx | xxxxxxx | 15,000 | xxxxxxx | xxxxxxx | x15,000 | x15,000 | x15,000 | xxxxxx | xxxxxx | xxxxxxx | xxxxxx | x45,000 | xxxxxxx | 45,000 |
| Total xxxx Inflow | xxxxxx | xxxxxxxx | x250,000 | x390,000 | 437,500 | x555,000 | xxxxxxxx | xxxxxxxx | x820,000 | xxxxxxx | 962,500 | xxxxxxxx | xxxxxxxx | 75,000 | 128,000 | x754,500 | 1,551,500 |
| xxxx xxxxxxxx | |||||||||||||||||
| Material Purchases (reference xxxxx | xxxxxxx | xxxxxxxx | x175,000 | xxxxxxx | xxxxxxx | xxxxxxx | x350,000 | xxxxxxxx | x325,000 | x450,000 | xxxxxxx | xxxxxxxx | xxxxxxxx | xxxxxxx | xxxxxxx | xxxxxxxxxx | x1,200,000 |
| Payment xxx Material Purchase | |||||||||||||||||
| xxxx xx xxxxx after xxxxxxxx | xxxxxxx | x100,000 | x175,000 | x200,000 | xxxxxxxx | 275,000 | 350,000 | 350,000 | xxxxxxxx | 450,000 | x425,000 | xxxxxxx | xxxxxxxx | x75,000 | xxxxxx | xxxxxxxxx | xxxxxxxxxx |
| Other xxxx Payments | |||||||||||||||||
| xxxxx xxxxxxxxxx xxxx 30% | xxxxxx | 30,000 | x52,500 | x60,000 | xxxxxxx | xxxxxx | xxxxxxxx | xxxxxxxx | 97,500 | x135,000 | xxxxxxx | 112,500 | xxxxxx | 28,500 | 450,000 | xxxxxxx | |
| xx - - - more text follows - - - |
file3.docx preview (1107 words)
xxxxxxx is xxxxxx to xxxx the xxxx budget for future 2 xxxxxx xxx xxxxx cash budget is xxxxxxxx on xxxxxxx xxxxx xxx the xxxxxx xxx is prepared on xxxxxxxxx xxxxxx As the company starts xx xxxx xxx xxxx xxxxxx xxx xxxxxxxxx we do not xxxx the xxxxxxx about previous xxxxxxx xxxxxxxxx xxx xxxx inflow xx very less. xx xxxxxxx x xxxxxxxxx xxxx the company borrow x 2, xxxxxx xx xx for one year. xxx xxxxxxx will xxxxxx xxxxxxxxxxx and instead xx borrowing short term for xxxx xxxxxx xxx xxxxxxx will bear xxxx cost xxxxx
xxxxx were xxxxx xxxxxxx xx borrow xxxxxxxxx 250,000 xx xxxxxxxxx xxxxxxxxx x xxxx xxxx make company xxxxxx xxxx often xxx if xxx xxxxxxx xxxxxxx 3 lakh, xxxxx xxxx xxxxxx be xxxxxx xxxxx So borrowing 2.50 lakh makes xxx company adequate xx xxxx of xxx months.
In xxx
- - - more text follows - - -
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