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Assignment 2: LASA 1—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.
Write a word essay – 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 recommendation.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 executives.
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
researchOther cash receipt: Rental income $15,000 per monthProduction
material: The production manager forecasted material cost based on cost
quotes from reliable vendors, the average of which is 50 percent of
salesOther
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 purchaseSelling and marketing expense: Five percent of salesGeneral and administrative expense: Twenty percent of salesInterest payments: $75, 000—Payable in DecemberTax payments: $15,000—Quarterly due on 15th of April, July, October, and JanuaryMinimum cash balance desired: $ 25,000 per monthCash balance start of month (December): $15,000Available
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 deficitDividend payment: NoneBased 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..next.ecollege.com/pub/content/fd9d28d4-cb87-4c44-88de-fa7dda5e8280/AUO_B6022_M3_A2_Cash_Budget_5w.xlsx”>Download this
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: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?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
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Calculated
a detailed company cash budget for the upcoming year and summarize the
sources and uses of cash, and identify the external financing needs for
the upcoming year.Recommended a financing solution and cost to the firm.Explained
your concerns associated with the firm’s cash budget and whether it is a
sign of weak sales performance or poor cost control. Why or why not?Wrote
in a clear, concise, and organized manner; demonstrate ethical
scholarship in accurate representation and attribution of sources; and
display accurate spelling, grammar, and punctuation.

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