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 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;Downloadthis 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.
Paper#30021 | Written in 18-Jul-2015Price : $37