Based on the information below build a Cash Budget for J & J Sports Inc.'s potential expansion.

Expected revenues for the first two years are as follows.

oSales for the 1^st quarter of Year 3 are projected at $650,000.

Year 1 ('000s)

Year 2 ('000s)

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

50.00

90.00

160.00

200.00

280.00

350.00

440.00

550.00

General and administrative expenses (wages, taxes, office etc.) are estimated to be $10,000 in Year 1 - Q1 and 20% of sales thereafter.

Sales salaries and commissions are estimated to be 8% of sales.

Accounts receivable at the beginning of this expansion are $0.

oCollection period = 30 days

Accounts payable at the beginning of the expansion are $0.

oThe Company quarterly purchases from suppliers = 50% of the next quarter's forecasted sales.

oSuppliers are paid on average in 60 days.

The company expects capital outlays in both Year 1 - Q1 of $40,000 and Year 2- Q1 of $20,000 each.

The expansion will start with an initial cash loan from the parent company of $100,000. Interest on this loan is $2,500 per quarter. The company will pay back the full $100,000 in the Year 2 - Q4.

Interest on any additional short-term borrowing is expected to be 5% per quarter.

The Company wishes to maintain a $100,000 minimum balance at all times to best manage its working capital and any unexpected commitments.

Question #2 - (10 marks)

From above, does the company require any short-term financing?Explain. (50 - 100 words)

a.If so, use the template in Appendix A to build a Short-Term Financing Plan.

Question #3 - (20 marks)

Based on your analysis in Assignments 1-4 create an Executive Summary for J & J Sports Inc.'s CEO on whether it should move forward with the expansion.