Short Term Financial Management

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Week 5 Group Project
Assignment Description
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 = 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
one­time 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
hanÕÉ≠†Њ†d 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 9­month period of March
through November.
oUse Excel to prepare the monthly cash budget.
Based
on your cash budget findings, answer the following questions:
oWill the company need any outside financing?
oWhat is the minimum line of credit that CBM will need?
oWhat do you think of CBM’s cash position during the budget period? Do you see any concerns for the company
in this regard?
oIf 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