Attached is a cash budget of July 2016 please explain.

ACC500 Case Study - Comprehensive Cash Budget Manchester Auditoriums Inc. provides the venue for many performers and talent companies touring the Southern New Hampshire region. Kathleen Johnson, treasurer of Manchester Auditoriums, needs to prepare a loan request to the Granite Cooperative Bank to meet the cash needs for the upcoming year which begins on January 1, 2016. Manchester Auditoriums has become a premier venue in the area and has grown considerably in the last few years. Below are the latest balance sheet and income statement for the year that just ended on December 31, 2015. Manchester Auditoriums Inc Balance Sheet As of December 31, 2015 (in thousands) Assets Cash Accounts receivable Supplies inventory Manchester Auditoriums Inc Income Statement Year ended December 31, 2015 (in thousands) Revenues 350 3,930 700 Expenses Salaries and wages 11,160 Unexpired insurance Total current assets 36 5,016 Depreciation Insurance expense 1,100 12 Net fixed assets 8,700 Supplies expense 5,120 13,716 Selling expense Administrative expense Utilities expense 1,805 1,900 444 180 665 684 Interest expense Total expenses 261 21,802 309 Pretax income Total assets $ $ 23,250 $ Liabilities and Equity Equity Line of credit Accounts payable* Accrued payroll $ Accrued expenses (S&A) Accrued Interest 3 Mortgage payable, current Total current liabilities Mortgage payable, long-term Stockholders' equity Total liabilities and equity $ 1,448 500 2,340 4,500 6,876 $ Return on sales 6.2% 13,716 *accounts payable: 628 related to supplies, 37 related to utilities Johnson is asking the bank to extend the existing line of credit to $1 million to help with the cash flow during the seasonal demands of the business and for the expansion of the business. The bank is requiring Manchester to maintain a minimum cash balance of $250k. Granite will charge interest at 6% Southern New Hampshire University - ACC500 Comprehensive Cash BudgetCase Study Page 2 per annum of the outstanding loan and accrued interest balance at the end of the quarter to be paid next quarter when cash becomes available; however, the accrued interest at the end of December 2015 must be paid in the first quarter of 2016. In the past, Manchester has not had any problem meeting the requirements of the existing line of credit. However, with the planned capital expenditures needed for expansion and the growing business needs, the loan manager has expressed concern with Johnson over the situation. The loan manager has asked for a quarterly cash budget and projected balanced sheet and income statement for 2016 to justify the need for the additional line of credit and to ensure that the company will be in compliance with the loan requirements. Kathleen Johnson has put together the following information for the upcoming year (all numbers are in thousands): 2015 Actual Sales $ Nov 2,100 Dec 2,850 2016 Budgeted Sales Jan 2,000 Feb 2,300 Mar 2,410 Apr 2,910 May 2,620 Jun Jul Aug Sep Oct Nov 2,470 1,970 1,920 2,060 2,130 2,510 Dec 3,360 Total 28,660 Cash Collections On sales from last year and Q1, Q2 of 2016 10% current month of the sale 25% next month of the sale 65% 2 months from the month of sale On sales for the 2nd half of 2016 20% current month of the sale 30% next month of the sale 50% 2 months from the month of sale Projected AR @ Dec 2016 is $3,943k All other budget assumptions: Supplies: - same percentage of sales as 2015 - purchased in the ratio of budgeted sales, paid a month later - ending balance in supplies is projected to be $650k Salaries & Wages: - 48% of budgeted sales, paid twice a month on the 1st and 15th - December 2015 accrued wages represents one-half of December wages Utilities: - 5% increase over 2015. Spread evenly each month, paid a month later Depreciation: - $1,240k spread evenly each quarter Selling & Admin: - 3% increase over 2015. Spread evenly each month, paid a month later - In the fourth quarter, additional $50k per month of selling expense Expired Insurance: - $12k Interest Expense: - obtain figures from cash budget worksheet Capital Spending: - Q1 $1,400k; Q2 $350k; Q3 $500k; Q4 $500k Southern New Hampshire University - ACC500 Comprehensive Cash BudgetCase Study Mortgage: Page 3 - the current payable is paid evenly throughout the year - interest is 5% per annum on the beginning total mortgage balance for the quarter Required: 1. Prepare a cash budget by quarter for 2016 using the provided template. Will Manchester keep their projected borrowing needs in line with the $1 million line of credit they are asking the bank for? 2. As we see in the budgeted assumptions, Manchester wants to improve its cash flow by concentrating on collecting receivables sooner in the second half of 2016. What else can Manchester do to improve its cash flow? 3. Prepare a projected income statement and balance sheet for 2016. 4. Manchester's goal is to have return on sales of 8% in 2016. Based on the projected income statement calculated for 2016 will Manchester achieve this goal? What are some things Manchester can do to improve its return on sales? 5. Based on the cash budget and projected financial statements, do you recommend that the company keep growing and spend money on capital expenditures? Why? Prepare your response in accordance with the grading rubric for a short paper/case study, and please show the detail of your calculations used to arrive at your answers. Prepare one Word document with both the narrative and schedules included. I recommend preparing the schedules/calculations in Excel where necessary and pasting them into the body of the paper