a) Provide an analysis of the results from the original cash budget created during step 1. The analysis will include a discussion of the anticipated sales in relation to the estimated labor and materials, as well as the overall month to month surplus cash or loan needed and what appears to be attributing to the surplus or need. The analysis should also include a discussion of the implications for the business as presented in the results.(6 pts)
b) If management increases cash sales from 30% to 60%, what type of investment policy does this action typically reflect? What reasons would management have for increasing the anticipated cash sales? Explain and support your response to each question. (4 pts)
c) Using the data, explain how the changes to cash sales and target cash balance would impact the need for external funds each month. What are the potential advantages and disadvantages of implementing the actions without adjusting overall sales? Your response should include a discussion of the goals of cash management, the goal of each action individually, as well as the combined effect on the external funds needed. (4 pts)
Step 1:
Step 2:
Anticipated Sales Sales (gross) Cash sales Jue July August Septemb October Novembe Decembe January February March AMay ay $15,000 $20,000 $30,000 $50,000 $40,000 $20,000 $10,000 $5,000 $15,000 $25,000 $40,000 $35,000 $15,000 $4,500 $6,000 $9,000 $15,000 $12,000 $6,000 $3,000 $1,500 $4,500 $7,500 $12,000 $10,500 $4,500 Collections During 1st month after sale During 2nd month after sale Other cash receipts $9.450 $12,600 $18,900$31,500 $25,200 $12,600 $6,300 $3,150 $9,450 $15,750 $25,200 $22,050 $1,050 $1,400 $2,100 $3,500 $2,800 $1,400 $700 $350 $1,050 $1,750 $2,800 $10,000 $1,000 Total Cash Receipts $4,500 $25,450 $22,650 $35,300 $45,600 $34,700 $18,400 $10,200 $8,350 $17,300 $28,800 $37,450 $29,350 Disbursements Variable: Labor and raw materials Fixed: inteerst, rent, and admin expenses Other cash disbursements Total cash disbursements $3,000 $25,000 $38,000 $30,000 $10,000 $5,000 $3,000 $12,000 $14,000 $31,000 $29,000 $14,000 $7,000 $3,000 $3,000 $3,000 $3,000 $3,000$3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $1,000 $2,500 $25,000 $6,000 $28,000 $41,000 $34,000 $15,500 $8,000 $6,000 $15,000 $42,000 $34,000 $32,000 $17,000 $10,000 Cash Surplus (or Loan Requirement Cash gain (or loss) during the month Cash position at beginning of month Cash position at end of month Target cash balance $1,500) ($2,550) ($18,350) $1,300 $30,100 $26,700 $12,400 ($4,800 ($33,650) ($16,700) ($3,200) $20,450 19,350 $12,000 $10,500 $7,950 ($10,400) ($9,100) $21,000 $47,700 $60,100 $55,300 $21,650 $4,9501,750 $22,200 $10,500 $7,950 ($10,400) ($9,100) $21,000 $47,700 $60,100 55,300 $21,650 $4,950 1,750 $22,200 $41,550 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $6,000 $6,000 $6,000 $10,000 Surplus cash or loan needed S500 ($2,050) ($20,400) ($19,100) $11,000 $37,700 $50,100 $45,300 $11,650 ($1,050) ($4,250) $16,200 $31,550 May Jue ulyAugust Septemt October Novemb Decemb January February March Ap May Anticipated Sales Sales (gross) Cash sales Collections During 1st month after sale During 2nd month after sale Other cash receipts Total Cash Receipts $15,000 $20,000 $30,000 $50,000 $40,000 $20,000 $10,000 $5,000 $15,000 $25,000 $40,000 $35,000 $15,000 $9,000 $12,000 $18,000 $30,000 $24,000 $12,000 $6,000 $3,000 $9,000 $15,000 $24,000 $21,000 $9,000 $5,400 %7,200 $10,800 $18,000 $14,400 $7,200 $3,600 $1,800 5,400 $9,000 $14,400 $12,600 $600 $800 $1,200 2,000 1,600 800 $400 200 $600 $1,000 $1,600 9,000 $27,400 $25,800 $41,600 $43,200 $28,400 $14,800 $8,400 $11,200 $20,600 $33,600 $36,400 $23,200 3,000 $25,000 $38,000 $30,000 $10,000 $5,000 $3,000 $12,000 $14,000 $31,000 $29,000 $14,000 $7,000 $10,000 $1,000 Disbursements Variable: Labor and raw materials Fixed: nteerst, rent, and admin expenses Other cash disbursements Total cash disbursements 3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $1,000 $2,500 $25,000 $6,000 $28,000 $41,000 $34,000 $15,500 $8,000 $6,000 $15,000 $42,000 $34,000 $32,000 $17,000 $10,000 Cash Surplus (or Loan Requirement) Cash gain (or loss) during the month Cash position at beginning of month Cash position at end of month Target cash balance 3,000 (600) ($15,200) $7,600 $27,700 $20,400 $8,800 ($6,600) ($30,800) ($13,400) $1,600 $19,400 $13,200 $12,000 $15,000 $14,400 (S800) $6,800 $34,500 $54,900 $63,700 57,00 $26,300 $12,900 $14,500 $33,900 $15,000 $14,400 ($800) $6,800 $34,500 $54,900 $63,700 $57,100 $26,300 $12,900 $14,500 $33,900 $47,100 $4,000 $4,000 $4,000 $4,000 4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 Surplus cash or loan needed 11.000 $10,400 ($4,800) $2,800 30,500 $50,900 $59,700 $53,100 $22,300 $8,900 $10,500 $29,900 $43,100 Anticipated Sales Sales (gross) Cash sales Jue July August Septemb October Novembe Decembe January February March AMay ay $15,000 $20,000 $30,000 $50,000 $40,000 $20,000 $10,000 $5,000 $15,000 $25,000 $40,000 $35,000 $15,000 $4,500 $6,000 $9,000 $15,000 $12,000 $6,000 $3,000 $1,500 $4,500 $7,500 $12,000 $10,500 $4,500 Collections During 1st month after sale During 2nd month after sale Other cash receipts $9.450 $12,600 $18,900$31,500 $25,200 $12,600 $6,300 $3,150 $9,450 $15,750 $25,200 $22,050 $1,050 $1,400 $2,100 $3,500 $2,800 $1,400 $700 $350 $1,050 $1,750 $2,800 $10,000 $1,000 Total Cash Receipts $4,500 $25,450 $22,650 $35,300 $45,600 $34,700 $18,400 $10,200 $8,350 $17,300 $28,800 $37,450 $29,350 Disbursements Variable: Labor and raw materials Fixed: inteerst, rent, and admin expenses Other cash disbursements Total cash disbursements $3,000 $25,000 $38,000 $30,000 $10,000 $5,000 $3,000 $12,000 $14,000 $31,000 $29,000 $14,000 $7,000 $3,000 $3,000 $3,000 $3,000 $3,000$3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $1,000 $2,500 $25,000 $6,000 $28,000 $41,000 $34,000 $15,500 $8,000 $6,000 $15,000 $42,000 $34,000 $32,000 $17,000 $10,000 Cash Surplus (or Loan Requirement Cash gain (or loss) during the month Cash position at beginning of month Cash position at end of month Target cash balance $1,500) ($2,550) ($18,350) $1,300 $30,100 $26,700 $12,400 ($4,800 ($33,650) ($16,700) ($3,200) $20,450 19,350 $12,000 $10,500 $7,950 ($10,400) ($9,100) $21,000 $47,700 $60,100 $55,300 $21,650 $4,9501,750 $22,200 $10,500 $7,950 ($10,400) ($9,100) $21,000 $47,700 $60,100 55,300 $21,650 $4,950 1,750 $22,200 $41,550 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $6,000 $6,000 $6,000 $10,000 Surplus cash or loan needed S500 ($2,050) ($20,400) ($19,100) $11,000 $37,700 $50,100 $45,300 $11,650 ($1,050) ($4,250) $16,200 $31,550 May Jue ulyAugust Septemt October Novemb Decemb January February March Ap May Anticipated Sales Sales (gross) Cash sales Collections During 1st month after sale During 2nd month after sale Other cash receipts Total Cash Receipts $15,000 $20,000 $30,000 $50,000 $40,000 $20,000 $10,000 $5,000 $15,000 $25,000 $40,000 $35,000 $15,000 $9,000 $12,000 $18,000 $30,000 $24,000 $12,000 $6,000 $3,000 $9,000 $15,000 $24,000 $21,000 $9,000 $5,400 %7,200 $10,800 $18,000 $14,400 $7,200 $3,600 $1,800 5,400 $9,000 $14,400 $12,600 $600 $800 $1,200 2,000 1,600 800 $400 200 $600 $1,000 $1,600 9,000 $27,400 $25,800 $41,600 $43,200 $28,400 $14,800 $8,400 $11,200 $20,600 $33,600 $36,400 $23,200 3,000 $25,000 $38,000 $30,000 $10,000 $5,000 $3,000 $12,000 $14,000 $31,000 $29,000 $14,000 $7,000 $10,000 $1,000 Disbursements Variable: Labor and raw materials Fixed: nteerst, rent, and admin expenses Other cash disbursements Total cash disbursements 3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $1,000 $2,500 $25,000 $6,000 $28,000 $41,000 $34,000 $15,500 $8,000 $6,000 $15,000 $42,000 $34,000 $32,000 $17,000 $10,000 Cash Surplus (or Loan Requirement) Cash gain (or loss) during the month Cash position at beginning of month Cash position at end of month Target cash balance 3,000 (600) ($15,200) $7,600 $27,700 $20,400 $8,800 ($6,600) ($30,800) ($13,400) $1,600 $19,400 $13,200 $12,000 $15,000 $14,400 (S800) $6,800 $34,500 $54,900 $63,700 57,00 $26,300 $12,900 $14,500 $33,900 $15,000 $14,400 ($800) $6,800 $34,500 $54,900 $63,700 $57,100 $26,300 $12,900 $14,500 $33,900 $47,100 $4,000 $4,000 $4,000 $4,000 4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 Surplus cash or loan needed 11.000 $10,400 ($4,800) $2,800 30,500 $50,900 $59,700 $53,100 $22,300 $8,900 $10,500 $29,900 $43,100
