short paragraph explaining why you believe this company?s loan application should or should not be approved solely based on the ratio that you computed. Compare to the industry average or if there is no industry average given for your part, comment on the health of the company based on your ratio.

Please see the attachment.

Major Project Deliverables Name of the Student Name of the Institution Date of Submission 1|Page Major Project Deliverables MILESTONE I -Evaluating a Company's Budget Procedures Discuss how the budgeting process as employed by Springfield Corporation contributes to the failure to achieve the president's sales and profit targets. The budgeting process used currently by Springfield Corporation is contributing greatly to the failure in the achievement of the president's profit and sales objectives, since the establishment of budget goals is from top to bottom contrary to the expected bottom to the top. The corporation's budget is a \"top-down\" which is a limitation in relation to both the human interaction and realistic data, which are necessities in the budgeting and control process. It initial trend of desired target goals is right as created by the president since the strategic objectives should be put in place by the senior employee; none the less, detailed resource allocation must begin from below and as per the departments' estimation since it's the departments that will actually carry out the allocated tasks (Pilkington & Crowther, 2007). The currently employed process is resulting in a conflicting environment that places the different departments into grabbing for resources. According to Heckert & Willson (2007), in case the departments were permitted to make their own cost estimates on the basis of preferred corporate goals, then there would be more accuracy in the cost estimates. Allowing the subordinates' contribution into the planning process would result into an environment of collaboration that ensures higher motivation for the achievement of goals. There would be increased accountability in regards to performance as there was creation of detailed goals by those individuals responsible for operations (Dunbar, 2011). Suggest how Springfield Corporation's budgeting process could be revised to correct the problem. Effective budgeting is highly dependent on an organizational structure that is sound in nature. In all the segments of operations there must be a clearly defined responsibility, authority and structure. Springfield Corporation as an organization ought to do responsibility accounting ensuring link in the decisions made by the manager's, and also ensure delegation of some decisions to the individuals at the lower levels who possess day-to-day operations' knowledge. The objective is to help in the planning and control of the business. In responsibility accounting, at every level, the performance of a manager is evaluated at every level, and managers can take the role of distinguishing controllable as well as non-controllable fixed costs, make sure that there is identification of cost, profits and also investment, profit, and investment. On the basis of these principles, there would be evaluation, revision, and correction of the budgeting process utilized by Springfield Corporation, if needed. Should the functional areas be expected to cut their costs when sales volume falls below budget? Explain your answer. 2|Page The focus of the budget should always be on specific goals. In case of some departments give an over-estimation, and the volume of sale is low then, there would be need of cutting the budget. Communication in the budget process is of major necessity among the departments in the attainment of effective budget planning. MILESTONE II - Completing a Master Budget 1. Schedule of Expected Cash Collections April May June Quarter Cash Sales($) 36,000 43,200 54,000 133,200 Credit sales($) 20,000 24,000 28,800 72,800 Total($) 56,000 67,200 82,800 206,000 2. Merchandise Purchases Budget April May June Quarter Budgeted cost of goods sold($) 45,000 54,000 67,500 166,500 Add desired ending inventory($) 43,200 54,000 28,800 28,800 Total needs($) 88,200 108,000 96,300 195,300 Less beginning Inventory($) 36,000 Required purchases ($) 52,200 64,800 43,200 54,000 42,300 36,000 159,300 3. Schedule of Expected Cash Disbursements- Merchandise Purchases April May June Quarter March Purchases($) 21,750 0 0 21,750 April Purchases($) 26,100 26,100 0 52,200 May Purchases($) 0 32,400 32,400 64,800 June Purchases($) 0 0 21,150 21,150 3|Page Total Disbursements($) 47,850 58,500 53,550 159,900 4. Cash Budget Cash Budget April May June 8,000 4,350 4,910 8,000 Add cash collections 56,000 67,200 82,800 206,000 Total cash receivable 64,000 71,550 87,710 214,000 For Inventory 47,850 58,500 53,550 159,900 For Expenses 13,300 15,460 18,700 47,460 1,500 0 0 Beginning cash balance Quarter Less cash disbursements: For Equipment Total Cash Disbursements 62,650 73,960 1350 -2410 1500 72,250 15,460 208,860 5,140 Financing: Borrowings 3000 Repayments Interest Total financing Cash balance, ending 7,320 0 10,320 0 0 -5,000 -5,000 0 0 -210 -210 -5,210 5,110 3,000 7,320 4,350 4,910 5. Income statement for the quarter June 30 Sales $ 206,000 Cost of goods sold: Begin. Inventory $ 36,000 Purchases $ 159, 300 Total 195,300 Less ending Inventory Cost of goods available for sale 4|Page 28,800 166,500 10,250 10,250 Gross Margin 39,500 Expenses Commission 26,640 Rent 7,500 Depreciation 2,700 Other Expenses 13,320 Total expenses 50,160 -10,660 Interest expense -210 Net income/loss -10,870 6. Balance Sheet for the quarter June 30 Current Assets: Cash 10,250 Account receivable 20,000 Inventory 28,800 Total current Assets 59,050 Fixed Asset Net 120,000 Total Assets 179,050 Liability and Shareholders' Equity Account Payable Bank loan payable Common stock Retained Earnings (12,250+-10,870) = Suspense a/c 5|Page 21,750 4000 150,000 1,380 1,920 Total liabilities and shareholders' Equity 179,050 Operating cycle of the Corporation In calculation of Operating cycle, the following formula applies: Operating cycle = DIO + DSO - DPO In which DIO is the Days Inventory Outstanding DSO is the Day Sales Outstanding DPO is the Days Payable Outstanding Calculating operating cycle provides valuable information to the company and therefore its determination is vital. DIO = (Average inventories / cost of sales) * 365 = Average inventory = (opening Inventory +closing Inventory)/2=(36,000+28,800)/2 = 32,400 and cost of sales is 166,500 DIO = 32,400/166,500 *365 = 71 days DSO = (Average accounts receivables / net sales) * 365 Account receivable is 20,000 Net sales is 206,000 = 20,000/206,000*365 = 35 days DPO = (Average accounts payables / cost sales) * 365 = 21,750/166,500*365 6|Page = 47 days Operating cycle = DIO+DSO-DPO = 71+35-47 = 106-47 = 59 days This confirms that on average it takes 59 days for the company to convert purchasing inventories into cash sales. In accounting, operating cycles are fundamental to sustaining levels of cash important for survive. Maintenance of a beneficial net operating cycle ratio is a life or death matter. References Dunbar, R. L. (2011). Budgeting for control. Administrative Science Quarterly, 88-96. 7|Page Heckert, J. B., & Willson, J. D. (2007). Business budgeting and control. Ronald Press Co.. Pilkington, M., & Crowther, D. (2007). Budgeting and control. Financial Management, issued in March. 8|Page