LASA 1—Genesis Cash Budget Report

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 recommendation.
• 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 sales.
• 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 – $15,000
• 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