LASA 1—Genesis Cash Budget Report
The Genesis operations management team is now preparing to implement the operating expansion plan. Previously the firm’s cash position did not pose a challenge. However, the planned foreign expansion requires Genesis to have a reliable source of funds for both short-term and long-term needs.
One of Genesis’s potential lenders tells the team that in order to be considered as a viable customer, Genesis must prepare and submit a monthly cash budget for the current year and a quarterly budget for the subsequent year. The lender will review the cash budget and determine whether or not Genesis can meet the loan repayment terms. Genesis’s ability to repay the loan depends not only on sales and expenses but also on how quickly the company can collect payment from customers and how well it manages its supplier terms and other operating expenses. The Genesis team members agreed that being fully prepared with factual data would allow them to maximize their position as well as negotiate favorable financing terms.
The Genesis management team held a brainstorming session to chart a plan of action, which is detailed here.
Since this expansion is critical to Genesis Corporation expanding into new overseas markets, the operations management team has been asked to prepare an executive summary with supporting details for Genesis’s senior executives.
Working over a weekend, the management team developed realistic assumptions to construct a working capital budget.
Based on this information, do the following:
Download this Excel spreadsheet to view the company’s cash budget. You will calculate the company’s monthly cash budget for the forthcoming year and quarterly budget for the subsequent year using this information.
a) Your recommended financing solution and cost to the firm: If Genesis needs operating cash, how should it fund this need? Are there internal policy changes with regard to collections or payables management you would recommend? What types of external financing are available?
b) Your concerns associated with the firm’s cash budget. Is this a sign of weak sales performance or poor cost control? Why or why not?
Write a 7-page paper in Word format. Apply APA standards to citation of sources. Use the following file naming convention: LastnameFirstInitial_M3_A2.doc.
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