To avoid any uncertainty regarding his business' financing needs at the time when such needs may arise, Cyrus Brown wants to develop a cash budget for his latest venture: Cyrus Brown Manufacturing (CBM). He has estimated the following sales forecast for CBM over the next 9 months:
| March |
$100,000 |
| April |
$275,000 |
| May |
$320,000 |
| June |
$450,000 |
| July |
$700,000 |
| August |
$700,000 |
| September |
$825,000 |
| October |
$500,000 |
| November |
$115,000 |
He has also gathered the following collection estimates regarding the forecast sales:
- Payment collection within the month of sale = 25%
- Payment collection the month following sales = 55%
- Payment collection the second month following sales = 20%
Payments for direct manufacturing costs like raw materials and labor are made during the month that follows the one in which such costs have been incurred. These costs are estimated as follows:
| March |
$187,500 |
| April |
$206,250 |
| May |
$375,000 |
| June |
$337,500 |
| July |
$431,250 |
| August |
$640,000 |
| September |
$395,000 |
| October |
$425,000 |
Additional financial information is as follows:
- Administrative salaries will approximately amount to $35,000 a month.
- Lease payments around $15,000 a month.
- Depreciation charges, $15,000 a month.
- A one-time new plant investment in the amount of $95,000 is expected to be incurred and paid in June.
- Income tax payments estimated to be around $55,000 will be due in both June and September.
- And finally, miscellaneous costs are estimated to be around $10,000 a month.
- Cash on hand on March 1 will be around $50,000, and a minimum cash balance of $50,000 shall be on hand at all times.
To receive full credit on this assignment, please show all work, including formulas and calculations used to arrive at the financial values.
Project Guidelines
- Prepare a monthly cash budget for Cyrus Brown Manufacturing for the 9-month period of March through November.
- Use Excel to prepare the monthly cash budget.
- Based on your cash budget findings, answer the following questions:
- Will the company need any outside financing?
- What is the minimum line of credit that CBM will need?
- What do you think of CBM's cash position during the budget period? Do you see any concerns for the company in this regard?
- If you were a bank manager, would you want CBM as your client? Why or why not?
Your submitted Project (150 points) must include the following:
- 75 Points. An Excel spreadsheet that contains your group's monthly cash budget for Cyrus Brown Manufacturing.
- 75 Points. A double-spaced Word document of 1-2 pages that contains your answers to the questions listed in the Assignment Guidelines.
Grading
You will be graded on the accuracy of your monthly cash budget and your demonstrated understanding of financial analysis procedures.
Please add your file.
For assistance with your assignment, please use your text, Web resources, and all course materials.
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Grading Criteria
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Percentage
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Deliverable requirements addressed; understanding of material and writer's message and intent are clear.
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40%
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Calculation methods, where required, are contextually appropriate, fully explained, and presented in a manner that is easy to understand.
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10%
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External research incorporated in the paper, if any, supports the writer's position properly acknowledged and cited; direct quotations may not exceed 10% of the word count of the body of the assignment deliverable (excluded title page, abstract or table of contents if used, tables, exhibits, appendices, and reference page(s).) Inclusion of plagiarized content will not be tolerated and may result in adverse academic consequences.
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5%
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Critical thinking: Position is well-justified; logical flow; examples provided where appropriate.
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20%
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Structure: Includes introduction and conclusion; proper paragraph format; reads as a polished academic paper or professional presentation, as appropriate for the required assignment deliverable.
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10%
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Mechanical: No spelling, grammatical, or punctuation errors.
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10%
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APA: Deliverable is cited properly according to the APA Publication Manual (6th ed.).
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5%
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