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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.
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?
Assignment 2 Course Project—Genesis Cash Budget Report Assignment 2 Course Project—Genesis Cash Budget Report (NEW COURSE) A+++ Graded Already Use as Guide
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Assignment xx LASA 1—xxxxxxx Cash Budget xxxxxx
Assignment xx xxxxxx Project—xxxxxxx xxxx Budget xxxxxx
xxxxxxx xxxx xxxxxxxx
Introduction/about xxx xxxxxxx
xx xx known xxxx xxx organization xx xxxxx xx xxxxxxxxx some xx expansion xxxxx xxxx xxxx xxxx discussed xx last meeting. For expansion xxxxx xxx first step is to evaluate xxxx position of organization xxx xx understand xxx extent xx xxxxxxxxx xxxxxx xxx xxxxxxxxx plan.Till xxxx xx xxx xxx have any kind xx xxxxxxx xx terms xx cash xxxxxxxx xxx hence external xxxxxxxxx was xxx xx all needed. But xxxx we xxx talking xxxxx xxx xxxxxxxxx plans, it xx xxxxxxxxx to xxxxxxxxxx xxxx xxxxxx initially xxx expansion xxx xxxx xxxxx xxxx everything has been xxxxxxxxxxxx
Also xxxxxxx important factor to xxxxxxxx would be source xx xxxxxxxxx that xxxxxxxxxxxx can xxxx xxxx There xxx be three xxxxx xx xxxxxxxxx xxxx xx xxx evaluate:
Mix xx the
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file2.xlsx preview (195 words)
|Genesis xxxx xxxxxx xxxxxx|
|Monthly Budgetx||Quarterly Budget|
|xxxxx xxxxxxxxxx only)x||xxxxxxx||200,000||350,000x||xxxxxxxx||500,000||xxxxxxx||700,000||xxxxxxxx||xxxxxxxx||900,000x||850,000||750,000x||xxxxxxxx||xxxxxxxx||xxxxxxx||xxxxxxxxx||xxxxxxxxx|
|Cash xxxxxxxxxxx on xxxxx|
|xxx in xxxxx of xxxxx||xxxxxx||20,000||xxxxxxx||40,000||50,000||55,000x||70,000||70,000||xxxxxxx||xxxxxxx||85,000x||75,000||xxxxxx||xxxxxx||19,000||300,000||240,000|
|25% xx xxxxx xxxxx xxxxx xxxxx||xxxxxx||xxxxxxx||xxxxxx||xxxxxxxx||125,000x||xxxxxxxx||175,000x||xxxxxxx||162,500x||xxxxxxx||212,500x||xxxxxxxx||150,000x||44,167x||515,833x||xxxxxxx|
|35% xx second month xxxxx salex||xxxxxxx||70,000x||122,500||140,000x||xxxxxxx||192,500||245,000||xxxxxxxx||227,500||315,000x||xxxxxxxx||xxxxxxx||xxxxxx||xxxxxxxx||980,000|
|30% in third xxxxx xxxxx salex||90,000x||xxxxxxx||105,000x||120,000||150,000||xxxxxxxx||210,000x||xxxxxxxx||195,000x||270,000||xxxxxxx||45,000x||xxxxxx||xxxxxxx|
|Other Cash Receiptsx||15,000x||15,000x||15,000x||xxxxxxx||xxxxxxx||xxxxxxx||15,000||xxxxxx||15,000x||xxxxxx||15,000||xxxxxxx||xxxxxxx||xxxxxx||45,000x||xxxxxx||xxxxxx|
|xxxxx xxxx xxxxxxx||xxxxxx||110,000||205,000x||xxxxxxxx||xxxxxxx||xxxxxxxx||517,500x||xxxxxxxx||665,000||xxxxxxx||762,500x||812,500||820,000x||1,295,000||xxxxxxxx||xxxxxxxxx||2,815,000|
|xxxxxxxx Purchases xxxxxxxxxx xxxxxx||150,000x||xxxxxxxx||xxxxxxx||200,000x||250,000x||275,000||xxxxxxxx||xxxxxxxx||xxxxxxxx||xxxxxxx||425,000||xxxxxxxx||xxxxxxx||xxxxxx||95,000||1,500,000||1,200,000|
|Payment xxx xxxxxxxx xxxxxxxx||150,000||xxxxxxx||175,000||200,000||xxxxxxxx||275,000||xxxxxxx||xxxxxxxx||325,000||450,000x||xxxxxxxx||xxxxxxxx||xxxxxxxx||88,333x||xxxxxxxxx||1,300,000|
|100% in month after purchase|
|xxxxx Cash Paymentsx||xxxxxx||30,000x||xxxxxxx||60,000||75,000x||xxxxxx||xxxxxxxx||xxxxxxxx||97,500x||xxxxxxxx||127,500||xxxxxxxx||xxxxxx||26,500||xxxxxxx||390,000|
|xxxxx production xxxx xxx xx Material xxxx xxxx xxxxx xxxxx xxxxxxxx|
|xxxxxxx xxx Marketing xxxxxxxx||15,000x||10,000||17,500x||20,000x||xxxxxx||27,500||35,000x||xxxxxxx||xxxxxxx||45,000x||42,500||37,500||25,000x||xxxxxx||xxxxxx||150,000x||xxxxxxx|
|xxxxxxx xxx Adminstrative xxxxxxxxx||xxxxxx||40,000||xxxxxxx||80,000||100,000x||110,000x||140,000||140,000||130,000x||180,000||170,000||xxxxxxxx||xxxxxxx||xxxxxxx||xxxxxxx||600,000x||480,000|
|xxxxx xxxx xxxxxxxxx||xxxxxxx||xxxxxxxx||217,500||327,500x||xxxxxxx||462,500||532,500x||xxxxxxx||617,500||647,500x||812,500x||740,000x||702,500x||xxxxxxx||177,333x||xxxxxxxxxx||2,380,000|
|xxx Cash Gain/(Loss)x||-135,000||-12,500||-25,000||-52,500||-22,500||xxxxxxxx||-42,500||47,500x||75,000x||-50,000x||xxxxxx||xxxxxxx||977,500x||xxxxxx||xxxxxxxxx||435,000|
|xxxx Flow xxxxxxx|
|xxxx xxxxxxx xxxxx xx xxx monthx||15,000||xxxxxxx||xxxxxxx||xxxxxx||xxxxxx||xxxxxxx||xxxxxxx||xxxxxxx||xxxxxx||147,500x||97,500||170,000x||xxxxxxxx||1,265,000x||xxxxxxxxxx||504,000|
|Net Cash Gain/lossx||xxxxxxxx||xxxxxxx||-25,000x||-52,500||xxxxxxxx||xxxxxxx||-42,500x||xxxxxxx||75,000||xxxxxxx||72,500x||117,500x||977,500x||xxxxxx||xxxxxxxx||xxxxxxx|
|Cash xxxxxxx at xxx xx xxxxxx||-120,000x||xxxxxx||0x||-27,500x||xxxxxx||xxxxxx||xxxxxxx||72,500x||xxxxxxxx||97,500||xxxxxxxx||xxxxxxxx||xxxxxxxxxx||xxxxxxxxxx||xxxxxxxx||939,000|
|xxxxxx xxxx xxxxxxx xxxxxxx||xxxxxxx||25,000||25,000||25,000||25,000x||25,000||25,000||xxxxxxx||25,000||25,000||25,000x||xxxxxx||25,000x||xxxxxxx||25,000||25,000|
|Surplus cash xxxxxxxxx||xxxxxxxxx||xxxxxxxx||-25,000x||-52,500||-22,500||xxxxxxx||xxxxxxx||47,500x||122,500x||72,500||xxxxxxxx||xxxxxxxx||1,240,000||xxxxxxxxx||479,000||914,000|
|External xxxxxxxxx xxxxxxx|
|xxxxxxxx Financing xxxxxxxx||0x||xxxxxxxx||xxxxxxx||182,500||xxxxxxxx||257,500||272,500||315,000||315,000||315,000x||xxxxxxxx||xxxxxxxx||xxxxxxxx||315,000||xxxxxxxx||315,000|
|xx start of xxxxx|
|xxx xxxxxxxxx Required||-145,000x||xxxxxxx||xxxxxxxx||xxxxxxxx||-22,500||-15,000x||-42,500||xx||0x||x||xx||x||xx||0x||0||0|
|(negative xxxxxx xxxx xxxx|
|xxxxxxxx Financing Requirementx||145,000x||xxxxxx||25,000||xxxxxx||xxxxxx||xxxxxxx||42,500x||x||0x||x||x||0x||0x||xx||0x||x|
|External Financing xxxxxxxx||xxxxxxxx||157,500||182,500x||235,000||xxxxxxxx||272,500x||315,000||xxxxxxx||xxxxxxx||xxxxxxxx||xxxxxxx||xxxxxxx||315,000x||xxxxxxxx||315,000x||315,000|
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