I need help finishing the Optimistic Cash Budget

OU Be the Consultant In Search of a Cash Flow Forecast rll never make that mistake again," Douglas Martinez tants office that afternoon, they started organizing the said to himself as he got into his car. Martinez had just information. Here is what they came up with: left a meeting with his banker, who had not been opti mistic about the chances of Martinez's plumbing supply company getting the loan it needed. "I should have been better prepared for the meeting." he muttered, sl knowing that he could be angry only at himself. That consultant at the Small Business Development Center was right. Bankers' primary concern when making loans s cash flow $8,750 71% on credit and 29% in cash 68% in the same month as the sale 19% inthe first month after the sale 7% in the second month after the sale 5% never collected (bad debts) Current cash balance Sales pattern Collections ofcredit At least I salvaged the meeting by telling him I wasn't ready to officially apply for a loan yet," Martinez thought. "But I've got a lot of work to do. I've got a week to figure out how to put together a cash budget to supplement my loan application. Maybe that coslctober tant can help me. Pessimistic Most Likely Optimistic $18,750 $19.200 S17,840 15,000 17.500 S19.750 14,000 16,500 18,500 $11,.200 S13,000 $14,000 9.900 12.500 $14,900 $10,500 S13,800 $15,800 $13.500 17.500 S19,900 Martinez cal August (actual) September (actual) When he returned to his office, Martinez gatheredDecember up the file folders containing all of his fast-growing January company's financial reports and printed his projected February revenues and expenses using his computer spreadsheet March Then he called the SBDC consultant he had worked with when he was launching his company and explained the situation. When he arrived at the consul- Utilities expenses Rent Truck loarn $800 per month. $1,200 per month S317 per month CHAPTER 12 MANAGING CASH FLOW 441 Estimated wages and salaries (including payroll taxes) Computer supplies $75 per month S1,825 $1,725 $1,725 S1,950 $250 per month S60 per month Legal and accounting fees January A tax payment of $1,400 is due in December Martinez has established a minimum cash balance of $2,000 and can borrow moncy at an interest rate of 8.75 percent The company pays 63 percent of the sales price for"Well, what do you think?" Douglas asked the consultant. the inventory it purchases, an amount that it actually pays in the following month. (Martinez has negotiated 1. Assume the role of the S8DC consultant and help net 30" credit terms with his suppliers) Douglas to put together a cash budget for the six months beginning in October business from this cash budget? improve his company's cash flow? Other expenses: $1,200, payable in August and 2. What conclusions can you draw about Douglas Office supplies 3. What suggestions can you make to help Douglas $95 per moath $75 per moath