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Assignment 2: LASA 1?Genesis Cash Budget Report




Question;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;researchOther cash receipt: Rental income $15,000 per monthProduction;material: The production manager forecasted material cost based on cost;quotes from reliable vendors, the average of which is 50 percent of;salesOther;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 purchaseSelling and marketing expense: Five percent of salesGeneral and administrative expense: Twenty percent of salesInterest payments: $75, 000?Payable in DecemberTax payments: $15,000?Quarterly due on 15th of April, July, October, and JanuaryMinimum cash balance desired: $ 25,000 per monthCash balance start of month (December): $15,000Available;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 deficitDividend payment: NoneBased 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.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: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?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;Grading Lubric;Calculated;a detailed company cash budget for the upcoming year and summarize the;sources and uses of cash, and identify the external financing needs for;the upcoming year.Recommended a financing solution and cost to the firm.Explained;your concerns associated with the firm's cash budget and whether it is a;sign of weak sales performance or poor cost control. Why or why not?Wrote;in a clear, concise, and organized manner, demonstrate ethical;scholarship in accurate representation and attribution of sources, and;display accurate spelling, grammar, and punctuation.


Paper#49714 | Written in 18-Jul-2015

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