Music Master has asked you to prepare an analysis of its cash requirements until such time as its forecasted cash receipts begin to exceed its forecasted disbursements. The company will use your analysis to determine venture capital funding requests.

Blake and Anna Carlson are preparing a plan to submit to venture capitalist to fund their business, Music Masters. The company plans to spend $380,000 on equipment in the first quarter of 20X7. Salaries and other operating expenses (paid as incurred) will be $35,000 per month beginning in January 20X7 and will continue at that level thereafter. The company will receive its first revenuers in January 20X8, with cash collections averaging $30,000 per moth and continue at the level thereafter. Cash collections are expected to increase to $1000,000 per month and continue at that level thereafter.

Assuming that the company needs enough funding to cover all its cash needs until cash receipts start exceeding cash disbursements? How much venture capital funding should Blake and Anna seek?

(Display answers in a spreadsheet)

1. Based on its stated objective of stopping venture capital funding when cash receipts begin to exceed cash disbursements, in what month/year should Music Masters no longer require venture capital funding why?

2. What is the total amount of expenditures Music Masters will incur before its cast receipts begin to exceed its cash disbursements? What is the total amount of venture capital funding that Music Masters should request?

3. Is the amount of venture capital funding that Music Masters should request equal to its total expenditures? If not, why are the amounts different?