The company is just getting started and wants to project where it will be at the end of its first six months of operation.

The founders contributed $55,000 in exchange for common stock, while $45,000 came from outsiders, also in exchange for common stock. The new firm expects to rent manufacturing space for $3,000 per month. Overhead is estimated at $25,000 per month. Equipment (Capital Expenditure) worth $60,000 was purchased with part of the initial funds. Firm orders for $500,000 worth of products are on hand, with more expected (this statement is to justify the sales projection it is not put in the cash budget). Sales are projected at $100,000 per month. Labor costs are estimated to amount $20,000 per month, and materials and supplies will be purchased at the rate of $40,000 per month.

The sales and administrative expenses are expected to run about $18,000 per month for the first several months. Collections are expected to average about 30 days, while purchases are to be made mostly on terms of net 30 days. The minimum cash balance needed for operations is $15,000.

Is the business adequately capitalized?

What suggestions do you have for the business?