Please read the relevant parts of your textbook, which refer to cash flow and fi
ID: 2623801 • Letter: P
Question
Please read the relevant parts of your textbook, which refer to cash flow and financial planning.
To avoid any uncertainty regarding his business' financing needs at the time when such needs may arise, Cyrus Brown wants to develop a cash budget for his latest venture: Cyrus Brown Manufacturing (CBM). He has estimated the following sales forecast for CBM over the next 9 months:
He has also gathered the following collection estimates regarding the forecast sales:
Payments for direct manufacturing costs like raw materials and labor are made during the month that follows the one in which such costs have been incurred. These costs are estimated as follows:
Additional financial information is as follows:
To receive full credit on this assignment, please show all work, including formulas and calculations used to arrive at the financial values.
Group Project Guidelines:
Your submitted Group Project (200 points) must include the following:
March $100,000 April $275,000 May $320,000 June $450,000 July $700,000 August $700,000 September $825,000 October $500,000 November $115,000Explanation / Answer
Cash Budget Mar April May June July Aug Sept Oct Nov Total Sales 100000 275000 320000 450000 700000 700000 825000 500000 115000 3985000 Collection 25% 25000 68750 80000 112500 175000 175000 206250 125000 28750 996250 55% 0 55000 151250 176000 247500 385000 385000 453750 275000 2128500 20% 0 20000 55000 64000 90000 140000 140000 165000 674000 Total collection 25000 123750 251250 343500 486500 650000 731250 718750 468750 3798750 less payments labor and material 0 187500 206250 375000 337500 431250 640000 395000 425000 2997500 Salaries 35000 35000 35000 35000 35000 35000 35000 35000 35000 315000 Lease payment 15000 15000 15000 15000 15000 15000 15000 15000 15000 135000 New plant 95000 95000 Taxes 55000 55000 110000 Misc Cost 10000 10000 10000 10000 10000 10000 10000 10000 10000 90000 Total payments 60000 247500 266250 585000 397500 491250 755000 455000 485000 3742500 Surplus/Deficit -35000 -123750 -15000 -241500 89000 158750 -23750 263750 -16250 56250 add Opening balance 50000 15000 -108750 -123750 -365250 -276250 -117500 -141250 122500 50000 Closing balance 15000 -108750 -123750 -365250 -276250 -117500 -141250 122500 106250 106250 Minimum Cash balance 50000 50000 50000 50000 50000 50000 50000 50000 50000 additional fund needed -35000 -158750 -173750 -415250 -326250 -167500 -191250 72500 56250 106250 less already taken 35000 158750 173750 415250 326250 167500 191250 -72500 Net requirement for the month -35000 -123750 -15000 -241500 0 0 -23750 Will the company need any outside financing? Yes in the month of Mar, to June and in September What is the minimum line of credit that CBM will need? $15,000 What do you think of CBM's cash position during the budget period? Do you see any concerns for the company in this regard? The company starts with the financing needed in the beginning but will be able to generate enough to pay off loan against line of credit. It depends on the accuracy of the cash flow during the period of operation. If you were a bank manager, would you want CBM as your client? Why or why not? If the cash flows expected has reasonable accuracy and will be generated in actual then the loan may be approved as the company will be able to repay the loan in the 9 months of operation
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