To 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.

Cyrus Brown Manufacturing Cash Budget March 20XX through November 20XX Financial Information

March April May June July August September October November Cash Inflows Sales Forecast $100,000.00 $275,000.00 $320,000.00 $450,000.00 $700,000.00 $700,000.00 $825,000.00 $500,000.00 $115,000.00 25 % Cash Collection month of sale ( sales forecast * .25) $25,000.00 $68,750.00 $80,000.00 $112,500.00 $175,000.00 $175,000.00 $206,250.00 $125,000.00 $28,750.00 55% Cash collection first month after sale (sales forecast * .55) $55,000.00 $151,250.00 $176,000.00 $247,500.00 $385,000.00 $385,000.00 $453,750.00 $275,000.00 20% Cash collection from second month after sale (sales forecast * .20) $20,000.00 $55,000.00 $64,000.00 $90,000.00 $140,000.00 $140,000.00 $165,000.00 Total Cash Flows $25,000.00 $123,750.00 $251,250.00 $343,500.00 $486,500.00 $650,000.00 $731,250.00 $718,750.00 $468,750.00 Cash Out Flows Less Payments for Direct MFG costs month after purchase $187,500.00 $206,250.00 $375,000.00 $337,500.00 $431,250.00 $640,000.00 $395,000.00 $425,000.00 $0.00 Less Administartive Salaries $35,000.00 $35,000.00 $35,000.00 $35,000.00 $35,000.00 $35,000.00 $35,000.00 $35,000.00 $35,000.00 Less Lease Payments $15,000.00 $15,000.00 $15,000.00 $15,000.00 $15,000.00 $15,000.00 $15,000.00 $15,000.00 $15,000.00 Less New Plant Investment $95,000.00 Less Income Tax Payments $55,000.00 $55,000.00 Less Miscellaneous Costs $10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00 Total Cash Outflow $247,500.00 $266,250.00 $435,000.00 $547,500.00 $491,250.00 $700,000.00 $510,000.00 $485,000.00 $60,000.00 Net Cash Gain or Loss $ (222,500.00) $ (142,500.00) ($183,750.00) ($204,000.00) ($4,750.00) ($50,000.00) $221,250.00 $233,750.00 $408,750.00 Cash Flow Summary Cash Balance at Beginning of Month $50,000 $50,000.00 $50,000.00 $50,000.00 $50,000.00 $50,000.00 $50,000.00 $50,000.00 $50,000.00 Net Cash gain (loss) during month $ (222,500.00) $ (142,500.00) $ (183,750.00) $ (204,000.00) $ (4,750.00) $(50,000.00) $ 221,250.00 $ 233,750.00 $ 408,750.00 Cash Balance at End of month (before financing) ($172,500.00) ($92,500.00) ($133,750.00) ($154,000.00) $45,250.00 $0.00 $271,250.00 $283,750.00 $458,750.00 Minimum cash Balance desired (50K each month) 50000 50000 50000 50000 50000 50000 50000 50000 50000 Cash Surplus or (Cash Deficit) ($222,500.00) ($142,500.00) ($183,750.00) ($204,000.00) ($4,750.00) ($50,000.00) $221,250.00 $233,750.00 $408,750.00 If these are my findings then what would be the correct answers to theses questions below, please if you can help?

• • 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?