Original Cash Budget (Step 2)

Management Proposed Changes:

Note- I'm looking for guidance/explanations as to why certain things would be included in this analysis. I appreciate your help!

c) Using the data, explain how the changes to cash sales and target cash balance would impact the need for external funds each month. What are the potential advantages and disadvantages of implementing the actions without adjusting overall sales? Your response should include a discussion of the goals of cash management, the goal of each action individually, as well as the combined effect on the external funds needed. What additional actions can management take to improve the cash budget for the remaining years of the 4-year operating plan (2021,2022, 2023) that can increase FCF and intrinsic value?

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