finance help

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.

1. Sales: The marketing expert and the newly created customer service personnel developed sales projections based on historical data and forecast research.
2. Other cash receipt: Rental income $15,000 per month.
3. Production material: The production manager forecasted material cost based on cost quotes from reliable vendors, the average of which is 50 percent of sales.
4. 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.
5. Selling and marketing expense: Five percent of sales
6. General and administrative expense: Twenty percent of sales
7. Interest payments: Payable in December – $75, 000
8. Tax payments: Quarterly due 15th of April, July, October, and January – $15,000
9. Minimum cash balance desired: – $ 25,000 per month
10. Cash balance start of month (December):$15,000
11. 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. 
12. Dividend payment: None

Based on this information, do the following:

Using the

Cash Budget

spreadsheet, calculate detailed company cash budgets for the forthcoming and subsequent years. Summarize the sources and uses of cash, and identify the external financing needs for both the forthcoming and subsequent years.Cash Budget

Download

 this Excel spreadsheet to view the company’s cash budget. You will calculate the company’s monthly cash budget for the forthcoming year and quarterly budget for the subsequent 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?

Write a 7-page paper in Word format. Apply APA standards to citation of sources. 

Sheet1

00)

Dec March June Sept Dec

700,000

500,000

40,000 50,000

70,000

50,000

75,000 50,000

175,000

70,000

175,000

245,000

90,000

105,000

210,000 210,000

15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 45,000 45,000 45,000 45,000

(350,000)

(250,000)

(150,000) (100,000) (175,000) (200,000) (250,000) (275,000) (350,000) (350,000) (325,000) (450,000) (425,000) (375,000) (250,000) (570,000) (1,006,250) (1,265,625) (1,155,000)

(105,000)

(75,000)

(45,000) (30,000) (52,500) (60,000) (75,000) (82,500) (105,000) (105,000) (97,500) (135,000) (127,500) (112,500)

(35,000)

(45,000)

(25,000)

(100,000)

(140,000)

(150,000) (100,000)

(375) (375) (375) (375) (375) (375) (375) (375) (375) (375) (75,000)

(4,500) (4,500)

0 0 0

0 0 (15,000) 0 0 (15,000) 0 0 0

150,000

(115,375) (140,375) (110,375) (177,875) (130,375) (195,375) (147,875) (25,375) (185,375) (152,875) 9,625 182,500 (451,500) (604,125) (412,313) 104,636

2,534,625 2,394,250 2,283,875 2,106,000 1,975,625 1,780,250 1,632,375 1,607,000 1,421,625 1,268,750 1,278,375 1,460,875 1,009,375 405,250 150,000

150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000

2,534,625 2,394,250 2,283,875 2,106,000 1,975,625 1,780,250 1,632,375 1,607,000 1,421,625 1,268,750 1,278,375 1,460,875 1,009,375 405,250

)

254,636

50,000 50,000 50,000

0 0 0 0 0 0 0 0 0 0 0 0 0 0 (142,938) 0

0 0 0 0 0 0 0 0 0 0 0 0 0 0 142,938 0

External Financing Balance 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000

192,938

																																																	Genesis Cash Budget ($																																								0
Monthly Budget	Quarterly Budget
		Dec	Jan	Feb		March	April	May		June	July	Aug		Sept	Oct	Nov
Cash Inflow
Sales (Reference only)	300,000	200,000	3																				50,000	400,000		500,000	550,000		700,000	650,000	900,000	850,000	750,000	1,1	40,000	2,012,500	2,531,250	2,310,000
Cash Collections on Sales
10% in month of sale	20,000	35,000	55,000			70,000	65,000		90,000	85,000		75,000	114,000	201,250	253,125	231,000
25% in first month after sale	87,500	100,000	125,000	137,500			175,000	162,500	225,000	212,500	187,500	255,000	416,875	576,563	687,500
35% in second month after sale		105,000	122,500	140,000	192,500		2				45,000	227,500	3												15,000	297,500			210,000	503,125	767,813	924,000
30% in third month after sale	60,000	120,000																			150,000	165,000	195,000	270,000	108,000	327,750	590,625	742,500
Other Cash Receipts
Total Cash Inflow	110,000	205,000	302,500	347,500	440,000	517,500	602,500	665,000	722,500	762,500	812,500	820,000	732,000	1,494,000	2,233,125	2,630,000
Cash Outflows
Material Purchases (reference only)			(150,000)				(100,000)		(175,000)		(200,000)				(250,000)		(275,000)				(350,000)		(325,000)		(450,000)		(425,000)		(375,000)		(570,000)		(1,006,250)		(1,265,625)		(1,155,000)
Payment for Material Purchase
100% in month after purchase
Other Cash Payments
Other production cost 30%			(45,000)		(30,000)		(52,500)		(60,000)				(75,000)		(82,500)				(105,000)		(97,500)		(135,000)		(127,500)		(112,500)	(171,000)	(301,875)	(379,688)	(346,500)
of Material cost paid month	(153,000)	(250,125)	(345,938)	(412,500)
after Purchase
Selling and Marketing Expense	(10,000)	(17,500)	(20,000)		(25,000)	(27,500)		(35,000)	(32,500)	(42,500)	(37,500)	(57,000)	(100,625)	(126,563)	(115,500)
General and Adminstrative expenses	(40,000)	(70,000)	(80,000)	(110,000)		(140,000)	(130,000)	(180,000)	(170,000)	(228,000)	(402,500)	(506,250)	(462,000)
Interest Payment											(375)			(4,500)	(17,364)
Tax Payment			(15,000)	(32,250)	(16,875)	(16,500)
Dividend Payment
Total Cash Outlfows	(225,375)	(345,375)	(412,875)	(525,375)	(570,375)	(712,875)	(750,375)	(690,375)	(907,875)	(915,375)	(802,875)	(637,500)	(1,183,500)	(2,098,125)	(2,645,438)	(2,525,364)
Net Cash Gain/(Loss)		(115,375)		(140,375)		(110,375)		(177,875)		(130,375)		(195,375)		(147,875)		(25,375)		(185,375)		(152,875)		9,625		182,500		(451,500)		(604,125)		(412,313)		104,636
Cash Flow Summary
Cash Balance start of the month	2,650,000			2,534,625			2,394,250			2,283,875			2,106,000			1,975,625			1,780,250			1,632,375			1,607,000			1,421,625			1,268,750			1,278,375			1,460,875			1,009,375			405,250
Net Cash Gain/loss
Cash Balance at end of month		254,636
Minium cash Balance desired
Surplus cash (deficit)		(	142,938
External Financing Summary
	External Financing Balance
at start of month
New Financing Required
(negative amount from cash
suplus (deficit)
External Financing Requirement
	192,938

Sheet2

Sheet3