Case Study: Budgeting

A new company, Apex, was started on December 1, 2013. Below are their sales forecast and other financial information. Based on this information, provide an financial analysis that includes the following:

1) Prepare an income statement budget.

2) Prepare a cash flow budget

3) Does the company have enough capitalization?

4) Which month does the company achieve positive cash flow?

Sales Forecast:

January 2014     $100,000

February           $150,000

March               $200,000

April                 $200,000

May                 $300,000

June                $300,000

July                 $300,000

Each month thereafter

Salaries: $30,000/month

Facilities: $10,000/month

Admin: $10,000/month

Cost of Goods Sold: 60% of sales

COGS cash disbursement 1 month prior to sale

No cash sales.

Receivables are collected as follows:

70% collected the following month of sales

20% two months after the sale

10% three months after the sale

Company has $250,000 in cash currently and a line of credit for $200,000