Question
Once the cash budget sheet that was created in Step 2 is complete, make a duplicate of original cash budget . Given the poor financial
Once the cash budget sheet that was created in Step 2 is complete, make a duplicate of original cash budget . Given the poor financial performance from 2020 to 2021 which resulted in an average uncollectible rate of 16.1%, management believes it can make the following changes:
Increase cash sales from 1% to 15%.
Triple the percentage of customers that pay during the month after the sale.
Increase the percentage of customers that pay during the second month after the sale from 7.5% to 35%
Lower the percentage of customers that pay during the third month after the sale from 64.9% down to 25%.
Reduce the desired level of cash (target cash balance) from $100 million to $50 million.
I don't need this first part but I need
Analyze the results from the original cash budget created during Step 2. The analysis should 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 while explaining what appears to be attributing to the surplus or need. This does not imply that every month and line item should be discussed. For the analysis, emphasis should be on the significant surplus cash and loans needed. Explain what appears to be a seasonality factor with sales and the timing of the raw materials and labor. The analysis should also include a discussion of the implications for the business in terms of profits, FCF, risk, intrinsic value, etc. The information previously gathered about Flagstaff, Inc. should be used to discuss the implications.
Considering the recommended changes, what type of current asset investment policy do these actions typically reflect? What reasons would management have for making the changes? Explain and support your response to each question. (3 pts)
Illustrate and explain how the recommended changes would impact the surpluses and external funds needed. What are the potential advantages and disadvantages of implementing the actions without adjusting overall sales? The response should relate the basic goals of cash management, the goal of each action individually, as well as the combined effect on the cash budget. What additional actions can management take to improve the cash budget for the remaining years of the 4-year operating plan (2023, 2024, 2025) that can increase FCF and intrinsic value?
Original is below
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