Financial Management

Please read the relevant parts of a textbook, which refer to cash flow and financial planning.

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 = 20%
• Payment collection the month      following sales = 60%
• 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?
• It is up to the members of the      group to divide the assignment tasks evenly. You will be graded on group      participation

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.