Unit 5 Group Project - CBM Cash Flow Statement - 37391

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Request Description

o avoid any uncertainty regarding his business' financing needs at the time when such needs may arise, Cyrus Brown wants to develop a cash budget for his latest venture: Cyrus Brown Manufacturing (CBM). He has estimated the following sales forecast for CBM over the next 9 months:

 

March        $100,000
April           $275,000
May            $320,000
June            $450,000
July             $700,000
August        $700,000
September  $825,000
October     $500,000
November   $115,000

He has also gathered the following collection estimates regarding the forecast sales:

  • Payment collection within the month of sale = 25%
  • Payment collection the month following sales = 55%
  • Payment collection the second month following sales = 20%

Payments for direct manufacturing costs like raw materials and labor are made during the month that follows the one in which such costs have been incurred. These costs are estimated as follows:

March     $187,500
April       $206,250
May         $375,000
June        $337,500
July               $431,250
August         $640,000
September  $395,000
October  $425,000

Additional financial information is as follows:

  • Administrative salaries will approximately amount to $35,000 a month.
  • Lease payments around $15,000 a month.
  • Depreciation charges, $15,000 a month.
  • A one-time new plant investment in the amount of $95,000 is expected to be incurred and paid in June.
  • Income tax payments estimated to be around $55,000 will be due in both June and September.
  • And finally, miscellaneous costs are estimated to be around $10,000 a month.
  • Cash on hand on March 1 will be around $50,000, and a minimum cash balance of $50,000 shall be on hand at all times.

To receive full credit on this assignment, please show all work, including formulas and calculations used to arrive at the financial values.

Group Project Guidelines:

  • As a group, prepare a monthly cash budget for Cyrus Brown Manufacturing for the 9-month period of March through November.
    • Use Microsoft Excel to prepare the monthly cash budget.
  • Based on your cash budget findings, answer the following questions:
    • Will the company need any outside financing?
    • What is the minimum line of credit that CBM will need?
    • What do you think of CBM's cash position during the budget period? Do you see any concerns for the company in this regard?
    • If you were a bank manager, would you want CBM as your client? Why or why not?
Solution Description

 

        Today we will discuss Cyrus Brown Manufacturing (CBM) in order to determine whether outside financing will be required. In order to determine such, we will review the cash flow statement for the last nine months, March through November. Although the company has not actively been in business for an extended amount of time, the nine month timeframe should suffice and provide the required information. In order to do this we will be looking at how much cash has come in and out over the last nine months.

        The cash flow statement is one of the few most important documents because it provides detailed information of the financial activities of the business: received payments (cash inflow) and business expenses (cash outflow). Although the profit and loss statement is helpful because it provides the overall profits over a certain amount of time, it does not give as much information as a cash flow statement such as:

·       Detailed distributions (Silven-Hoell)

·      

Attachments
U5 Group ProjectSL.docx
U5 Group Projec...
Copy of GP 5 Excel part-2.xlsx
Copy of GP 5 Ex...