The Genesis Operations Management Team Is Now Prepari 809798

The Genesis Operations Management Team Is Now Preparing To Implement T

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. Evaluate historical data and prepare assumptions that will drive the planning process. Produce a detailed cash budget that summarizes cash inflow, outflow, and financing needs.

Identify and compare interest rates, both short-term and long-term, using debt and equity. Analyze the financing mix (short/long) and the cost associated with the recommendation. 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. Sales: The marketing expert and the newly created customer service personnel developed sales projections based on historical data and forecast research. Other cash receipt: Rental income $15,000 per month. Production material: The production manager forecasted material cost based on cost quotes from reliable vendors, the average of which is 50 percent of sales. Other production cost: Based on historical cost data, this cost on an average is 30 percent of the material cost and occurs in the month after material purchase. Selling and marketing expense: Five percent of sales. General and administrative expense: Twenty percent of sales. Interest payments: $75,000—Payable in December. Tax payments: $15,000—Quarterly due on 15th of April, July, October, and January. Minimum cash balance desired: $25,000 per month. Cash balance start of month (December): $15,000. Available short-term annual interest rate is 8 percent, long-term debt rate is 9 percent, and long-term equity is 10 percent. All funds would be available the first month when the firm encounters a deficit. Dividend payment: None. Based on this information, do the following: Using the Cash Budget spreadsheet, calculate detailed company cash budgets for the forthcoming and subsequent years. Summarize the sources and uses of cash, and identify the external financing needs for both the forthcoming and subsequent years. 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. In an executive-level report, summarize the company's financing needs for the forecast period and provide your recommendations for financing the planned activities.

Paper For Above instruction

The task at hand involves preparing a comprehensive cash budget for Genesis Corporation to support its upcoming international expansion and ensure effective financial planning. The process begins with analyzing historical financial data and developing realistic assumptions to forecast cash inflows, outflows, and financing needs over the designated periods. The key components include detailed monthly cash flow projections for the upcoming year and quarterly forecasts for the subsequent year, considering revenues, expenses, and external financing options.

To develop accurate cash budgets, sales projections must be precisely estimated based on historical performance and forecasts, accounting for inflation, market trends, and potential expansion impacts. Sales are projected using insights from the marketing and customer service teams, which predict growth in key markets, particularly considering the foreign expansion strategy. Correspondingly, cash receipts from rental income are anticipated at $15,000 monthly, providing a steady cash inflow that mitigates some operating pressures.

The procurement of production materials, forecasted at 50 percent of sales, hinges upon reliable vendor quotes, with subsequent periods reflecting the 30 percent of material costs based on historical data. The lag in capturing costs—costs settling in the month following purchases—is incorporated into the cash flow forecast, ensuring temporal accuracy. Selling and marketing expenses are estimated at 5 percent of sales, while general and administrative expenses are pegged at 20 percent of sales, aligning with typical industry margins.

Interest payments are set at $75,000, payable in December, while tax obligations of $15,000 are due quarterly in April, July, October, and January. A minimum cash balance of $25,000 is maintained monthly, with an initial starting cash balance of $15,000 in December. The scenario assumes an 8 percent annual rate for short-term borrowing, a 9 percent rate for long-term debt, and a 10 percent rate for long-term equity financing.

The preparation involves creating a detailed cash budget that captures all expected cash inflows and outflows, identifies periods of potential deficits, and calculates the external financing required to cover deficits falling below the minimum cash balance. The analysis will compare the costs of different financing sources, including short-term debt, long-term debt, and equity, to recommend the most cost-effective financing strategy aligning with the company's strategic goals.

Furthermore, the executive summary will interpret the cash budget outcomes, addressing questions around cash management policies, suggestions for internal improvements such as accounts receivable collection and payables management, and evaluating whether cash flow issues are symptomatic of underlying sales performance or cost control problems. The overall goal is to provide a strategic financial plan that supports the company's growth ambitions while maintaining fiscal discipline and minimizing financing costs.

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