Good cash management is impossible without an analysis of the cash collections and cash disbursements of a company. Cash budgets provide a gauge for determining credit, disbursement, and discount policies. Cash budgets are effective control devices for monitoring cash and determining financing requirements.
Cash budgets are essential to all small businesses. In this assignment, you are required to do the following:
- Develop a spreadsheet with a cash budget with lagging collections
- Determine the net cash flows for the year
- Forecast the cumulative dollar amount of the external financing required for the year
You are also required to prepare a 3-page analysis of the results of your cash budget.
Middletown Construction, Inc. has estimated the following sales forecast over the next 12 months (they close in the winter):
January
$0
February
$0
March
$275,000
April
$275,000
May
$312,000
June
$417,000
July
$714,000
August
$611,000
September
$827,000
October
$500,000
November
$116,000
December
$0
The company also gathered the following collection estimates regarding the forecast sales:
- Payment collection within the month of sale = 20%
- Payment collection the month following sales = 60%
- Payment collection the second month following sales = 20%
Payments for raw materials and labor costs are paid the month after the purchase and are estimated as follows:
March
$220,000
April
$240,000
May
$225,000
June
$287,000
July
$350,000
August
$415,000
September
$242,000
October
$214,000
November
$222,000
Additional financial information is as follows:
- Administrative salaries will approximately amount to $30,000 a month.
- Lease payments are around $10,000 a month.
- A one-time new plant investment for $23,000 is expected to incur and be paid in June.
- Income tax payments estimated to be around $50,000 will be due in both June and September.
- Miscellaneous costs are estimated to be around $5,000 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
Sheet1
| FINA425 UNIT 3 INDIVIDUAL ASSIGNMENT TEMPLATE | ||||||||||||||
| Student Name: Betty Ann Morrison_______________________ | ||||||||||||||
| Date submitted: __10/01/2024______________________ | ||||||||||||||
| Middletown Construction, Inc. | ||||||||||||||
| JANUARY | FEBRUARY | MARCH | APRIL | MAY | JUNE | JULY | AUGUST | SEPTEMBER | OCTOBER | NOVEMBER | DECEMBER | |||
| SALES FORECAST | 0 | 0 | 275,000 | 275,000 | 312,000 | 417,000 | 714,000 | 611,000 | 827,000 | 500,000 | 116,000 | 0 | ||
| CASH COLLECTIONS | ||||||||||||||
| MONTH OF SALE | 20% | |||||||||||||
| FIRST MONTH AFTER SALE | 60% | |||||||||||||
| SECOND MONTH AFTER SALE | 20% | |||||||||||||
| TOTAL CASH INFLOWS | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | ||
| JANUARY | FEBRUARY | MARCH | APRIL | MAY | JUNE | JULY | AUGUST | SEPTEMBER | OCTOBER | NOVEMBER | DECEMBER | |||
| DIRECT MANUFACTURING COSTS | – 0 | – 0 | 220,000 | 240,000 | 225,000 | 287,000 | 350,000 | 415,000 | 242,000 | 214,000 | 222,000 | – 0 | ||
| PAYMENTS FOR RAW MATERIALS ARE | ||||||||||||||
| MANUFACTURING COST PAYMENTS | ||||||||||||||
| ADMINISTRATIVE SALARIES | ||||||||||||||
| LEASE PAYMENTS | ||||||||||||||
| MISCELLANEOUS | ||||||||||||||
| TAX PAYMENTS | ||||||||||||||
| NEW PLANT COSTS | ||||||||||||||
| TOTAL CASH OUTFLOWS | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | ||
| MONTHLY NET CASH GAIN OR LOSS | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | ||
| CUMULATIVE NET CASH GAIN OR LOSS (YTD) | $ – 0 | $ – 0 | $ – 0 | |||||||||||
| JANUARY | FEBRUARY | MARCH | APRIL | MAY | JUNE | JULY | AUGUST | SEPTEMBER | OCTOBER | NOVEMBER | DECEMBER | |||
| CASH FLOW SUMMARY | ||||||||||||||
| 1. Cash balance at start of month | 50,000 | |||||||||||||
| 2. Net cash gain (loss) during month | ||||||||||||||
| 3. Cash bal. at end of month (before financing) | ||||||||||||||
| 4. Minimum cash balance desired | ||||||||||||||
| 5. Surplus cash (OR) Deficit cash (Line 3 – Line 4) | ||||||||||||||
| EXTERNAL FINANCING SUMMARY | ||||||||||||||
| 6. External financing balance – start of month | ||||||||||||||
| 7. New financing reqd (negative of Line 5) (if deficit!) | ||||||||||||||
| 8. Financing repayments (if surplus!) | ||||||||||||||
| 9. Ext financing balance – end of month | ||||||||||||||
| 10.Cash bal at end of mo (Line3 + Line7 + Line8) | ||||||||||||||
| Developed by Patrice Nybro June 22, 2020 |
Sheet2
Sheet3
,
Sheet1
| FINA425 UNIT 3 INDIVIDUAL ASSIGNMENT TEMPLATE | ||||||||||||||
| Student Name: Betty Ann Morrison_______________________ | ||||||||||||||
| Date submitted: __10/01/2024______________________ | ||||||||||||||
| Middletown Construction, Inc. | ||||||||||||||
| JANUARY | FEBRUARY | MARCH | APRIL | MAY | JUNE | JULY | AUGUST | SEPTEMBER | OCTOBER | NOVEMBER | DECEMBER | |||
| SALES FORECAST | 0 | 0 | 275,000 | 275,000 | 312,000 | 417,000 | 714,000 | 611,000 | 827,000 | 500,000 | 116,000 | 0 | ||
| CASH COLLECTIONS | ||||||||||||||
| MONTH OF SALE | 20% | |||||||||||||
| FIRST MONTH AFTER SALE | 60% | |||||||||||||
| SECOND MONTH AFTER SALE | 20% | |||||||||||||
| TOTAL CASH INFLOWS | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | ||
| JANUARY | FEBRUARY | MARCH | APRIL | MAY | JUNE | JULY | AUGUST | SEPTEMBER | OCTOBER | NOVEMBER | DECEMBER | |||
| DIRECT MANUFACTURING COSTS | – 0 | – 0 | 220,000 | 240,000 | 225,000 | 287,000 | 350,000 | 415,000 | 242,000 | 214,000 | 222,000 | – 0 | ||
| PAYMENTS FOR RAW MATERIALS ARE | ||||||||||||||
| MANUFACTURING COST PAYMENTS | ||||||||||||||
| ADMINISTRATIVE SALARIES | ||||||||||||||
| LEASE PAYMENTS | ||||||||||||||
| MISCELLANEOUS | ||||||||||||||
| TAX PAYMENTS | ||||||||||||||
| NEW PLANT COSTS | ||||||||||||||
| TOTAL CASH OUTFLOWS | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | ||
| MONTHLY NET CASH GAIN OR LOSS | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | $ – 0 | ||
| CUMULATIVE NET CASH GAIN OR LOSS (YTD) | $ – 0 | $ – 0 | $ – 0 | |||||||||||
| JANUARY | FEBRUARY | MARCH | APRIL | MAY | JUNE | JULY | AUGUST | SEPTEMBER | OCTOBER | NOVEMBER | DECEMBER | |||
| CASH FLOW SUMMARY | ||||||||||||||
| 1. Cash balance at start of month | 50,000 | |||||||||||||
| 2. Net cash gain (loss) during month | ||||||||||||||
| 3. Cash bal. at end of month (before financing) | ||||||||||||||
| 4. Minimum cash balance desired | ||||||||||||||
| 5. Surplus cash (OR) Deficit cash (Line 3 – Line 4) | ||||||||||||||
| EXTERNAL FINANCING SUMMARY | ||||||||||||||
| 6. External financing balance – start of month | ||||||||||||||
| 7. New financing reqd (negative of Line 5) (if deficit!) | ||||||||||||||
| 8. Financing repayments (if surplus!) | ||||||||||||||
| 9. Ext financing balance – end of month | ||||||||||||||
| 10.Cash bal at end of mo (Line3 + Line7 + Line8) | ||||||||||||||
| Developed by Patrice Nybro June 22, 2020 |