Genesis Energy Cash Position Analysis – Please don’t contact me if you can’t follow instructions and write a graduate style paper!!!!

Assignment 2: Genesis Energy Cash Position Analysis 

The Genesis Energy 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 Energy to have a reliable source of funds for both short-term and long-term needs.

One of Genesis Energy’s potential lenders tells the team that in order to be considered as a viable customer, Genesis Energy must prepare and submit a monthly cash budget for the current year and a monthly cash budget for the subsequent year. The lender will review the cash budget and determine whether or not Genesis Energy can meet the loan repayment terms. Genesis Energy’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 Energy 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 Energy 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 2 year 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 Energy expanding into new overseas markets, the operations management team has been asked to prepare an executive summary with supporting details for Genesis Energy’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. Please use the sales projections provided in the template. See “Download” in item 1 below.
2. Other cash receipt: Rental income $15,000 per month for Y1 and 20,000 for Y2.
3. Production material: The production manager forecasted material cost based on cost quotes from reliable vendors, the average of which is 45 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: Six percent of sales
6. General and administrative expense: 18 percent of sales
7. Interest payments: $10,000—Payable in December Y1 and $0 payable in December Y2.
8. Tax payments: $15,000—Quarterly due on 1st of April, July, October, and January
9. Minimum cash balance desired: $25,000 per month
10. Cash balance start of month (December): $10,000
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:

1. Using the Cash Budget spreadsheet, calculate detailed company cash budgets for the forthcoming and subsequent year. Summarize the sources and uses of cash, and identify the external financing needs for both the forthcoming and subsequent years.
   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.
2. 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:

   Your recommended financing solution and cost to the firm: If Genesis Energy 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?
   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. Use the following file naming convention: LastnameFirstInitial_M3_A2 .

By the due date assigned, deliver your assignment to the

Submissions

Area.

Assignment 2 Grading Criteria Maximum PointsCalculation of a detailed company cash budget for the upcoming year is complete and correct.
All inflow and outflow calculations are correct.
Summary of the sources and uses of cash, and identification of the external financing needs for the upcoming year is complete and correct.48Explanation how the assumed budget of this project will effect dividends for shareholders is clear, specific, and complete. The explanation includes all factors that the firm considers in dividend-decision making.32Recommended financing solution and cost to the firm are clear, complete, and correct. Financing solution includes short-term debt, long-term debt, or even equity.44Explanation of concerns associated with the firm’s cash budget and if it is a sign of weak sales performance or poor cost control is clear, complete, and correct.48Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources; and displayed accurate spelling, grammar, and punctuation.28Total:200

Attachments

Submissions

M3,A2

Argosy: Argosy:
Note, the percentages used in Year0 may be different from those estimated in the budget

ch

il

e

y

t

Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

350,000

400,000 300,000 350,000

600,000 550,000

450,000 450,000 450,000 500,000 550,000 600,000 750,000

800,000 600,000

35,000

40,000 30,000 35,000

60,000 55,000 50,000 45,000 45,000 45,000 50,000 55,000 60,000 75,000

80,000 60,000

75,000 75,000

87,500

100,000 75,000 87,500

150,000 137,500

112,500 112,500 112,500 125,000 137,500 150,000 187,500

200,000

105,000 105,000

122,500

140,000 105,000 122,500

210,000 192,500 175,000 157,500 157,500 157,500 175,000 192,500 210,000 262,500

90,000 90,000 90,000 105,000 105,000

120,000 90,000 105,000

210,000

180,000 165,000 150,000 135,000 135,000 135,000 150,000 165,000 180,000 225,000

12,500

15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000

562,500

475,000

150,000 157,500 157,500 180,000 180,000 135,000 157,500

270,000 247,500 225,000 202,500 202,500 202,500 225,000 247,500 270,000 337,500

360,000 270,000

150,000 150,000 157,500 157,500 180,000 180,000 135,000 157,500 202,500 247,500 270,000 315,000 337,500 270,000 247,500 225,000 202,500 202,500 202,500 225,000 247,500 270,000 337,500 360,000 360,000

45,000 45,000

47,250

54,000

47,250

81,000 74,250

60,750 60,750 60,750 67,500 74,250 81,000 101,250

108,000

15,000

21,000

24,000

21,000

45,000 36,000 33,000 30,000 27,000 27,000 27,000 30,000 33,000 36,000 45,000

48,000 36,000

60,000

63,000

72,000 54,000 63,000 81,000

108,000

135,000 108,000 99,000 90,000 81,000 81,000 81,000 90,000 99,000 108,000 135,000

144,000 108,000

75,000 10,000

. 15,000 15,000 15,000 15,000 15,000

– 0

345,000

371,250

465,750

26,000

37,500

82,500

10,000 (32,500)

(32,500) 26,000 43,750 54,250 37,500 84,000 125,500 44,750 (250) 9,250 28,500 50,500 94,750 199,500 200,750 162,000 146,250 113,750 91,750 68,000 61,750 56,500 31,750 82,500 173,000

54,000

970,500 1,171,250 1,333,250 1,479,500 1,593,250 1,685,000 1,753,000 1,814,750 1,871,250 1,903,000 1,985,500

10,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000

(32,500) (31,500) (12,750) 16,500 29,000 88,000 188,500 208,250 183,000 167,250 170,750 196,250

– 0 (32,500)

– 0 – 0

(12,750)

(32,500) (31,500) (12,750) 16,500 29,000 88,000

(32,500) (31,500) (12,750) – 0

External Financing Balance

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

																																																																																																	Module 3, Assignment 2 Template
Genesis Cash Budget
Year																				0	.	Monthly Cash Budget Year 1	Monthly Cash Budget Year 2
		Dec		Jan		Feb		Mar		Apr		May		Jun		Jul		Aug		Sep		Oct		Nov
Cash Inflow
Sales (Reference only)		300,000			3		50,000		400,000				450,000			550,000				600,000	700,000		750,000		500,000		800,000
Cash Collections on Sales
10% in month of sale				30,000			35,000		40,000								45,000			55,000					60,000	70,000						75,000		80,000
25% in first month after sale			87,500		100,000				1	12,500			1		37,500								150,000			175,000		187,500		1																								25,000		200,000
35% in second month after sale							105,000			122,500		140,000										157,500			192,500				2			10,000	245,000		262,500	280,000
30% in third month after sale							90,000		1												20,000								135,000			165,000							180,000						225,000
Other Cash Receipts																		15,000
Total Cash Inflow	312,500	320,000	332,500	355,000	3		82,500	390,000	385,000	372,500	395,000		475,000		562,500	640,000	687,500	697,500	642,500	517,500	485,000	492,500	527,500	587,500	662,500	742,500	785,000
Cash Outflows
Material Purchases (Reference only)								202,500						247,500							270,000		315,000				337,500				360,000
Payment for Material Purchase
100% in month after purchase
Other Cash Payments:
Other production cost 30%
of Material cost paid month
after Purchase			47,250				54,000	40,500				60,750			74,250							81,000	94,500		101,250		67,500						108,000
Selling and Marketing Expense			21,000		24,000	18,000				27,000			33,000				36,000	42,000		48,000
General and Administrative expenses			63,000		72,000			99,000	1		26,000		144,000
Interest Payment						– 0
Tax Payment
Dividend Payment
Total Cash Outflows		345,000	294,000	288,750	300,750	306,000	259,500	327,750	395,250		465,750	534,000	589,500	592,750	498,000	441,750	400,500		371,250	383,250	424,500	531,000	630,750	660,000	612,000
Net Cash Gain/(Loss)							(32,500)		43,750		54,250		84,000		125,500		44,750		(250)		9,250		28,500		50,500		94,750		199,500		200,750		162,000		146,250		113,750		91,750		68,000		61,750		56,500		31,750		173,000
Cash Flow Summary
Cash Balance start of the month				(31,500)					(12,750)			16,500			29,000			88,000		188,500		208,250		183,000		167,250		170,750		196,250	771,000		970,500		1,171,250		1,333,250		1,479,500		1,593,250		1,685,000		1,753,000		1,814,750		1,871,250		1,903,000		1,985,500
Net Cash Gain/loss
Cash Balance at end of month	(22,500)	(6,500)	12,250	41,500	113,000	213,500	233,250	208,000	192,250	195,750	221,250	291,000	2,158,500
Minimum Cash Balance desired
Surplus cash (deficit)	266,000	945,500	1,146,250	1,308,250	1,454,500	1,568,250	1,660,000	1,728,000	1,789,750	1,846,250	1,878,000	1,960,500	2,133,500
External Financing Summary
	External Financing Balance
at start of month	(64,000)	(76,500)	(60,000)	(31,000)
New Financing Required
negative amount from cash
surplus (deficit)
External Financing Requirement
-32,500	-64,000	-76,750	-60,000	-31,000