In August $2022,$ Cassandra Rivers, founder of Speak$-$On$,$ was finalizing plans for her company$$s first year of operations. Speak$-$on was a learning tool used in classrooms to help students improve their communication and public speaking skills. She can secure part of the funding from the government startup support, but she needs to understand the cash needs of her company to understand how to keep the new business venture moving. She planned to project a cash budget for fiscal year $2022.$

Perform a corporate capabilities analysis including Speak$-$On$$s strengths and weaknesses.

Speak$-$On$$s strengths and weaknesses are listed in the following table:

Strengths

$$ Cassandra$$s relationships with past private

school teachers

$$ Speak$-$On meets education standards

Weaknesses

$$ It is easy to find a replacement product in the

market;

$$ Public speaking may not be a necessary

requirements in course syllabus;

$$ Selling process is very time$-$consuming.

Prepare a cash budget $($Fiscal year from September $2022$ to August $2023).$ All the dollar terms below are expressed in USD dollars.

Cash Budget Inflows

Summer Company Grant

The government grant and owner contributions were given and both occurred in September. The government grant would be $$1,500,$ and Cassandra would invest $$500$ of her own savings. The initial $$1,500$ portion of the grant was received in the summer and had been used before the business had incorporated.

Sales

The sales are to use accrual accounting $($sales on account$).$ Therefore, while the sales process begins in December, the actual cash is collected in January, which is when it should be recorded in the cash budget. Cassandra estimated teachers would purchase two decks per sale, and since each deck was being sold for $$50,$ December sales would amount to $$500(5$ meetings $*2$ decks per sale $*$ $$50$ per deck$).($Tips: no need to reflect the number of decks sales in the cash budget$)$

Cassandra expects the sales revenue will start to increase by $10\%$ each month from February. Cassandra expects there will be no sales in summer from June to August.

Cash Budget Outflows

Logo and Website Development

The cost of securing a logo was a one$-$time outflow of $$87$ in September. A subscription to Canva would be $$168$ for the year and paid in monthly installments starting in September. This would create a monthly outflow by dividing $12$ months. The development of business cards through the Canva subscription would create another one$-$time outflow of $$60$ in October.

Development of the website was contracted out to a freelance programmer and Cassandra had agreed to a $$633$ contract. This expense would be incurred in November. Cassandra hosted the website on GoDaddy and paid a one$-$time fee of $$10$ to secure the domain name SpeakOn.com to be incurred in September as well as a $$5$ monthly charge for hosting fees starting in September.

Card Design

Component Studio was another subscription Cassandra signed up for, which resulted in a monthly outflow of $$20$ for the entire fiscal year.

Banking Fees & Insurance

Business registration was a one$-$time outflow of $$68$ to be paid in September. Insurance for the business had two components. A prepayment of $$138$ created a one$-$time outflow in September. Starting in December the insurance would be a monthly outflow of $$46($$$138$ three$-$month prepayment $/3$ months$).$ Bank fees were charged on the first day after the month of service; therefore, the September charge of $$20$ would be an outflow in October and so on throughout the year.

Inventory

Inventory purchases would be one$-$time outflows occurring in the month of delivery. The December shipment would result in an outflow of $$400(20$ decks $*$ $$20$ cost per deck$),$ the February shipment would see an outflow of $$1,400(70$ decks $*$ $$20$ cost per deck$),$ and the May shipment would be an outflow of $$800(40$ decks $*$ $$20$ cost per deck$).$

Line of Credit

The line of credit had an interest rate of eight per cent per annum and was based on the loan amount outstanding at the end of the previous month. Students are required to calculate interest based on the last month$$s ending cash balance. The interest would be paid in the following month.

Requirements $($arrange the answer in a blank sheet$)$:

$1.$ Prepare a cash budget from September $2022$ to August $2023.$ Based on your projected cash

budget, you need to determine how much financing, if any, is required in the first year of

operations $($i$.$e$.,$ the minimum requirement is to have a non$-$negative cash balance each month,

otherwise, Cassandra needs to consider financing$).$

$2.$ To avoid paying the interest, do you have any suggestions for Cassandra in business operating decisions?

$$ In terms of Line of Credit, if the question did not mention when to pay the principle, that means you can leave it alone as the principal payment is likely out of the required cash budget window.