Original Cash Budget (Step 2)

Management Proposed Changes:

-Note: If you could provide guidance on why certain factors are in the analysis this would truly help!

a) Provide an analysis of the results from the original cash budget created during Step 2. The analysis will 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. Emphasis should be on the significant surplus cash and loans needed. Explain what appears to be a seasonality factor with the 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.

b) If management is able to double the cash sales, what type of current asset investment policy does this action typically reflect? What reasons would management have for increasing the anticipated cash sales? Explain and support your response to each question.

Flagstaff Inc. Monthly Cash Budget (data in millions of dollars) 2020 IT Anticipated level of sales Estimated labor and raw materials Jan $135.00 $115.78 Feb $115.00 $98.41 Mar $95.00 $68.89 Apr $75.00 $41.33 May $70.00 $24.80 Jun $67.00 $19.84 Jul $53.10 $17.86 Aug $48.80 $16.07 Sep $38.00 $20.89 Oct $64.00 $58.34 Nov Dec $99.10 $130.00 $85.76 $128.64 Cash sales 14.10% Collections during month after sale 33.33% Collections during second month after sale 66.67% Other cash receipt - Treasuries (Apr) $2.10 Target cash balance $45.00 Interest, rent and administrative expenses $7.19 Other cash disbursement - income tax payments (Sep) $17.98 Other cash disbursement - retire loan (Jan) $15.00 Cash on hand (Dec 31, 2019 $41.60 Prepare a monthly cash budget for the next twelve months. 2020 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Anticipated Sales Sales (gross) Cash sales $ 135.00 $115.00 $ 95.00 $ 75.00 $ 70.00 $ 67.00 $ 53.10 $ 48.80 $ 38.00 $ 64.00 $ 99.10 $130.00 $ 19.04 $ 16.22 $ 13.40 $ 10.58 $ 9.87 $ 9.45 $ 7.49 $ 6.88 $ 5.36 $ 9.02 $ 13.97 $ 18.33 Collections During 1st month after sale During 2nd month after sale Other cash receipts $ 38.65 $ 32.93 $ 27.20 $ 21.47 $ 20.04 $ 19.18 $ 15.20 $ . .00 $ . .00 $ 77.31 $ 65.86$ 54.41 $ 42.95 $ 40.09 $ 38.37 $ . .00 $. .00 $. .00 $ 2.10 $ . .00 $. .00$ .00 $. .00 $ 13.97 $ 10.88 $ 18.32 $ 28.37 $ 30.41 $ 27.95 $ 21.76 $ 36.65 $. .00 $. .00 $ - .00 $ - .00 Total Cash Receipts $ 19.04 $ 54.87 $123.63 $105.73 $ 85.75 $ 72.44 $ 66.76 $ 60.45 $ 49.74 $ 47.85 $ 54.06 $ 83.36 Disbursements Variable: Labor and raw materials Fixed: interest, rent, and admin expenses Other cash disbursements $ 115.78 $ 98.41 $ 68.89 $ 41.33 $ 24.80 $ 19.84 $ 17.86 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 15.00$ - .00 $. .00 $. .00 $. .00 $. .00 $. .00 $ 16.07 $ 20.89 $ 7.19 $ 7.19 $ - .00 $ 17.98 $ 58.34 $ 7.19 $ - .00 $ 85.76 $128.64 $ 7.19 $ 7.19 $. .00 $ - .00 Total cash disbursements $ 137.97 $105.60 $ 76.08 $ 48.52 $ 31.99 $ 27.03 $ 25.05 $ 23.26 $ 46.06 $ 65.53 $ 92.95 $135.83 Cash Surplus (or Loan Requirement) Cash gain (or loss) during the month Cash position at beginning of month Cash position at end of month Target cash balance $ (118.93) $ (50.73) $ 47.56 $ 57.21 $ 53.76 $ 45.41 41.71 $ 37.19 $ 3.68 $ (17.68) $ (38.89) S (52.48) $ 41.60 $ (77.33) $ (128.07 $ (80.51) $ (23.30) $ 30.46 $ 75.87 $117.58 $154.77 $158.45 $140.77 $101.88 $ (77.33) $ (128.07 $(80.51) $ (23.30) $ 30.46 $ 75.87 $117.58 $154.77 $158.45 $140.77 $101.88 $ 49.40 $ (45.00) $ (45.00) $ (45.00) $ (45.00) $ (45.00) $ (45.00) $ (45.00) $ (45.00) $ (45.00) $ (45.00) $ (45.00) $ (45.00) Surplus cash or loan needed S (122.33) S (173.07 S (125.51 $ (68.30) S (14.54) $ 30.87 $ 72.58 $109.77 $113.45 $ 95.77 $ 56.88 $ 4.40 Flagstaff Inc. Monthly Cash Budget (data in millions of dollars) 2020 Anticipated level of sales Estimated labor and raw materials Jan $135.00 $115.78 Feb $115.00 $98.41 Mar $95.00 $68.89 Apr $75.00 $41.33 May $70.00 $24.80 Jun $67.00 $19.84 Jul $53.10 $17.86 Aug $48.80 $16.07 Sep $38.00 $20.89 Oct $64.00 $58.34 Nov Dec $99.10 $130.00 $85.76 $128.64 Cash sales 28.20% Collections during month after sale 66.67% Collections during second month after sale 33.33% Other cash receipt - Treasuries (Apr) $2.10 Target cash balance $22.50 Interest, rent and administrative expenses $7.19 Other cash disbursement - income tax payments (Sep) $17.98 Other cash disbursement - retire loan (Jan) $15.00 Cash on hand (Dec 31, 2019 $41.60 Proposed Changes Cash Sales 2 Increase Collections (month After) 66.67% Lower Collections (second month after) 33.33% Target Cash Balance (millions) 22.5 Prepare a monthly cash budget for the next twelve months. 2020 Jan Feb Mar Apr May Jun Aug Sep Oct Nov Dec $ 135.00 $ 38.07 $115.00$ 95.00 $ 75.00$ 70.00 $ 67.00 $ 53.10 $ 48.80 $ 38.00 $ 64.00 $ 99.10 $130.00 $ 32.43 $ 26.79 $ 21.15 $ 19.74 $ 18.89 $ 14.97 $ 13.76 $ 10.72 $ 18.05 $ 27.95 $ 36.66 Anticipated Sales Sales (gross) Cash sales Collections During 1st month after sale During 2nd month after sale Other cash receipts $ . .00 $ 64.62 $ 55.05 $ 45.48 $ 35.90 $ 33.51 $ 32.07 $ 25.42 $ 23.36 $ 18.19 $ 30.64 $ 47.44 $ . .00 $. .00 $ 32.31 $ 27.52 $ 22.73 $ 17.95 $ 16.75 $ 16.03 $ 12.71 $ 11.68 $ 9.09 $ 15.32 $ . .00 $. .00 $. .00 $ 2.10 $ . .00 $ . .00 $. .00 $. .00 $ . .00 $ . .00 $ . .00 $. .00 $ 38.07 $ 97.05 $ 114.15 $ 96.25 $ 78.38 $ 70.35 $ 63.80 $ 55.21 $ 46.78 $ 47.92 $ 67.68 $ 99.41 Total Cash Receipts Disbursements Variable: Labor and raw materials Fixed: interest, rent, and admin expenses Other cash disbursements $ 115.78 $ 98.41 $ 68.89 $ 41.33 $ 24.80 $ 19.84 $ 17.86 $ 16.07 $ 20.89 $ 58.34 $ 85.76 $128.64 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 15.00$. .00 $. .00 $. .00 $. .00 $. .00 $. .00 $ . .00 $ 17.98 $. .00$ - .00 $ . .00 Total cash disbursements $ 137.97 $105.60 $ 76.08 $ 48.52 $ 31.99 $ 27.03 $ 25.05 $ 23.26 $ 46.06 $ 65.53 $ 92.95 $135.83 Cash Surplus (or Loan Requirement) Cash gain (or loss) during the month Cash position at beginning of month Cash position at end of month Target cash balance $ (99.90) $ (8.55) $ 38.07 $ 47.72 $ 46.39 $ 43.32 $ 38.75 $ 31.95 $ 0.72 $ (17.62) $ (25.28) $ (36.42) $ 41.60 $ (58.30) $ (66.85) $ (28.78) $ 18.95 $ 65.33 $108.65 $147.40 $179.35 $180.08 $ 162.46 $137.19 $ (58.30) $ (66.85) $ (28.78) $ 18.95 $ 65.33 $108.65 $147.40 $179.35 $180.08 $162.46 $137.19 $100.77 $ (22.50) $ (22.50) S (22.50) S (22.50) $ (22.50) $ (22.50) $ (22.50) $ (22.50) $ (22.50) $ (22.50) $ (22.50) $ (22.50) Surplus cash or loan needed $ (80.80) $ (89.35) $ (51.28) $ (3.55) $ 42.83 $ 86.15 $124.90 $156.85 $157.58 $139.96 $114.69 $ 78.27 Flagstaff Inc. Monthly Cash Budget (data in millions of dollars) 2020 IT Anticipated level of sales Estimated labor and raw materials Jan $135.00 $115.78 Feb $115.00 $98.41 Mar $95.00 $68.89 Apr $75.00 $41.33 May $70.00 $24.80 Jun $67.00 $19.84 Jul $53.10 $17.86 Aug $48.80 $16.07 Sep $38.00 $20.89 Oct $64.00 $58.34 Nov Dec $99.10 $130.00 $85.76 $128.64 Cash sales 14.10% Collections during month after sale 33.33% Collections during second month after sale 66.67% Other cash receipt - Treasuries (Apr) $2.10 Target cash balance $45.00 Interest, rent and administrative expenses $7.19 Other cash disbursement - income tax payments (Sep) $17.98 Other cash disbursement - retire loan (Jan) $15.00 Cash on hand (Dec 31, 2019 $41.60 Prepare a monthly cash budget for the next twelve months. 2020 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Anticipated Sales Sales (gross) Cash sales $ 135.00 $115.00 $ 95.00 $ 75.00 $ 70.00 $ 67.00 $ 53.10 $ 48.80 $ 38.00 $ 64.00 $ 99.10 $130.00 $ 19.04 $ 16.22 $ 13.40 $ 10.58 $ 9.87 $ 9.45 $ 7.49 $ 6.88 $ 5.36 $ 9.02 $ 13.97 $ 18.33 Collections During 1st month after sale During 2nd month after sale Other cash receipts $ 38.65 $ 32.93 $ 27.20 $ 21.47 $ 20.04 $ 19.18 $ 15.20 $ . .00 $ . .00 $ 77.31 $ 65.86$ 54.41 $ 42.95 $ 40.09 $ 38.37 $ . .00 $. .00 $. .00 $ 2.10 $ . .00 $. .00$ .00 $. .00 $ 13.97 $ 10.88 $ 18.32 $ 28.37 $ 30.41 $ 27.95 $ 21.76 $ 36.65 $. .00 $. .00 $ - .00 $ - .00 Total Cash Receipts $ 19.04 $ 54.87 $123.63 $105.73 $ 85.75 $ 72.44 $ 66.76 $ 60.45 $ 49.74 $ 47.85 $ 54.06 $ 83.36 Disbursements Variable: Labor and raw materials Fixed: interest, rent, and admin expenses Other cash disbursements $ 115.78 $ 98.41 $ 68.89 $ 41.33 $ 24.80 $ 19.84 $ 17.86 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 15.00$ - .00 $. .00 $. .00 $. .00 $. .00 $. .00 $ 16.07 $ 20.89 $ 7.19 $ 7.19 $ - .00 $ 17.98 $ 58.34 $ 7.19 $ - .00 $ 85.76 $128.64 $ 7.19 $ 7.19 $. .00 $ - .00 Total cash disbursements $ 137.97 $105.60 $ 76.08 $ 48.52 $ 31.99 $ 27.03 $ 25.05 $ 23.26 $ 46.06 $ 65.53 $ 92.95 $135.83 Cash Surplus (or Loan Requirement) Cash gain (or loss) during the month Cash position at beginning of month Cash position at end of month Target cash balance $ (118.93) $ (50.73) $ 47.56 $ 57.21 $ 53.76 $ 45.41 41.71 $ 37.19 $ 3.68 $ (17.68) $ (38.89) S (52.48) $ 41.60 $ (77.33) $ (128.07 $ (80.51) $ (23.30) $ 30.46 $ 75.87 $117.58 $154.77 $158.45 $140.77 $101.88 $ (77.33) $ (128.07 $(80.51) $ (23.30) $ 30.46 $ 75.87 $117.58 $154.77 $158.45 $140.77 $101.88 $ 49.40 $ (45.00) $ (45.00) $ (45.00) $ (45.00) $ (45.00) $ (45.00) $ (45.00) $ (45.00) $ (45.00) $ (45.00) $ (45.00) $ (45.00) Surplus cash or loan needed S (122.33) S (173.07 S (125.51 $ (68.30) S (14.54) $ 30.87 $ 72.58 $109.77 $113.45 $ 95.77 $ 56.88 $ 4.40 Flagstaff Inc. Monthly Cash Budget (data in millions of dollars) 2020 Anticipated level of sales Estimated labor and raw materials Jan $135.00 $115.78 Feb $115.00 $98.41 Mar $95.00 $68.89 Apr $75.00 $41.33 May $70.00 $24.80 Jun $67.00 $19.84 Jul $53.10 $17.86 Aug $48.80 $16.07 Sep $38.00 $20.89 Oct $64.00 $58.34 Nov Dec $99.10 $130.00 $85.76 $128.64 Cash sales 28.20% Collections during month after sale 66.67% Collections during second month after sale 33.33% Other cash receipt - Treasuries (Apr) $2.10 Target cash balance $22.50 Interest, rent and administrative expenses $7.19 Other cash disbursement - income tax payments (Sep) $17.98 Other cash disbursement - retire loan (Jan) $15.00 Cash on hand (Dec 31, 2019 $41.60 Proposed Changes Cash Sales 2 Increase Collections (month After) 66.67% Lower Collections (second month after) 33.33% Target Cash Balance (millions) 22.5 Prepare a monthly cash budget for the next twelve months. 2020 Jan Feb Mar Apr May Jun Aug Sep Oct Nov Dec $ 135.00 $ 38.07 $115.00$ 95.00 $ 75.00$ 70.00 $ 67.00 $ 53.10 $ 48.80 $ 38.00 $ 64.00 $ 99.10 $130.00 $ 32.43 $ 26.79 $ 21.15 $ 19.74 $ 18.89 $ 14.97 $ 13.76 $ 10.72 $ 18.05 $ 27.95 $ 36.66 Anticipated Sales Sales (gross) Cash sales Collections During 1st month after sale During 2nd month after sale Other cash receipts $ . .00 $ 64.62 $ 55.05 $ 45.48 $ 35.90 $ 33.51 $ 32.07 $ 25.42 $ 23.36 $ 18.19 $ 30.64 $ 47.44 $ . .00 $. .00 $ 32.31 $ 27.52 $ 22.73 $ 17.95 $ 16.75 $ 16.03 $ 12.71 $ 11.68 $ 9.09 $ 15.32 $ . .00 $. .00 $. .00 $ 2.10 $ . .00 $ . .00 $. .00 $. .00 $ . .00 $ . .00 $ . .00 $. .00 $ 38.07 $ 97.05 $ 114.15 $ 96.25 $ 78.38 $ 70.35 $ 63.80 $ 55.21 $ 46.78 $ 47.92 $ 67.68 $ 99.41 Total Cash Receipts Disbursements Variable: Labor and raw materials Fixed: interest, rent, and admin expenses Other cash disbursements $ 115.78 $ 98.41 $ 68.89 $ 41.33 $ 24.80 $ 19.84 $ 17.86 $ 16.07 $ 20.89 $ 58.34 $ 85.76 $128.64 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 7.19 $ 15.00$. .00 $. .00 $. .00 $. .00 $. .00 $. .00 $ . .00 $ 17.98 $. .00$ - .00 $ . .00 Total cash disbursements $ 137.97 $105.60 $ 76.08 $ 48.52 $ 31.99 $ 27.03 $ 25.05 $ 23.26 $ 46.06 $ 65.53 $ 92.95 $135.83 Cash Surplus (or Loan Requirement) Cash gain (or loss) during the month Cash position at beginning of month Cash position at end of month Target cash balance $ (99.90) $ (8.55) $ 38.07 $ 47.72 $ 46.39 $ 43.32 $ 38.75 $ 31.95 $ 0.72 $ (17.62) $ (25.28) $ (36.42) $ 41.60 $ (58.30) $ (66.85) $ (28.78) $ 18.95 $ 65.33 $108.65 $147.40 $179.35 $180.08 $ 162.46 $137.19 $ (58.30) $ (66.85) $ (28.78) $ 18.95 $ 65.33 $108.65 $147.40 $179.35 $180.08 $162.46 $137.19 $100.77 $ (22.50) $ (22.50) S (22.50) S (22.50) $ (22.50) $ (22.50) $ (22.50) $ (22.50) $ (22.50) $ (22.50) $ (22.50) $ (22.50) Surplus cash or loan needed $ (80.80) $ (89.35) $ (51.28) $ (3.55) $ 42.83 $ 86.15 $124.90 $156.85 $157.58 $139.96 $114.69 $ 78.27