Short-term financial management

Please read the relevant parts of your 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.

Group Project Guidelines

• As a      group, 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 

Your submitted Group 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. You will also be graded on your group participation.

Please add your file.