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Genesis cash budget report

The Genesis operations management team is now preparing to

implement the operating expansion plan. Previously the firm?s cash position did

not pose a challenge. However, the planned foreign expansion requires Genesis to

have a reliable source of funds for both short-term and long-term needs.

One of Genesis?s potential lenders tells the team that in order to

be considered as a viable customer, Genesis must prepare and submit a monthly

cash budget for the current year and a quarterly budget for the subsequent year.

The lender will review the cash budget and determine whether or not Genesis can

meet the loan repayment terms. Genesis?s ability to repay the loan depends not

only on sales and expenses but also on how quickly the company can collect

payment from customers and how well it manages its supplier terms and other

operating expenses. The Genesis team members agreed that being fully prepared

with factual data would allow them to maximize their position as well as

negotiate favorable financing terms.

The Genesis management team held a brainstorming session to chart

a plan of action, which is detailed here.
Evaluate historical data and prepare assumptions that will drive the

planning process.
Produce a detailed cash budget that summarizes cash inflow, outflow, and

financing needs.
Identify and compare interest rates, both short-term and long-term, using

debt and equity.
Analyze the financing mix (short/long) and the cost associated with the


Since this expansion is critical to Genesis Corporation expanding

into new overseas markets, the operations management team has been asked to

prepare an executive summary with supporting details for Genesis?s senior


Working over a weekend, the management team developed realistic

assumptions to construct a working capital budget.
Sales: The marketing expert and the newly created customer service personnel

developed sales projections based on historical data and forecast research.
Other cash receipt: Rental income $15,000 per month.
Production material: The production manager forecasted material cost based

on cost quotes from reliable vendors, the average of which is 50 percent of

Other production cost: Based on historical cost data, this cost on an

average is 30 percent of the material cost and occurs in the month after

material purchase.
Selling and marketing expense: Five percent of sales
General and administrative expense: Twenty percent of sales
Interest payments: Payable in December ? $75, 000
Tax payments: Quarterly due 15th of April, July, October, and January ?

Minimum cash balance desired: ? $ 25,000 per month
Cash balance start of month (December):$15,000
Available short-term annual interest rate is 8 percent, long-term debt rate

is 9 percent, and long-term equity is 10 percent. All funds would be available

the first month when the firm encounters a deficit.
Dividend payment: None

Based on this information, do the following:
Using the Cash Budget spreadsheet, calculate detailed company cash budgets

for the forthcoming and subsequent years. Summarize the sources and uses of

cash, and identify the external financing needs for both the forthcoming and

subsequent years.

Cash Budget

Downloadthis Excel spreadsheet to

view the company?s cash budget. You will calculate the company?s monthly cash

budget for the forthcoming year and quarterly budget for the subsequent year

using this information.
In an executive-level report, summarize the company’s financing needs for

the forecast period and provide your recommendations for financing the planned

activities. Be sure to comment on the following:

a) Your recommended financing solution and cost to the firm: If Genesis needs

operating cash, how should it fund this need? Are there internal policy changes

with regard to collections or payables management you would recommend? What

types of external financing are available?
b) Your concerns associated with the firm’s cash budget. Is this a sign of

weak sales performance or poor cost control? Why or why not?

Write a 7-page paper in Word format. Apply APA standards to

citation of sources.