2024 – Good cash management is impossible without an analysis of the cash collections and cash disbursements

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$0February$0March$275,000April$275,000May$312,000June$417,000July$714,000August$611,000September$827,000October$500,000November$116,000December$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$220,000April$240,000May$225,000June$287,000July$350,000August$415,000September$242,000October$214,000November$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.

To receive full credit on this assignment, please show all work, including formulas and calculations used to arrive at the financial values.

• Prepare a monthly cash budget for Middletown Construction, Inc. for the 12-month period of January through December. 
• Use Excel to prepare the monthly cash budget with the use of this template.

Based on your cash budget findings, answer the following questions in a 3-page analysis:

• Will the company need any outside financing? 
• When is the line of credit the highest for MCI will need? 
• If you were a bank manager, would you want MCI as your client? Why or why not?

Please submit your assignment.

Submitting your assignment in APA format means, at a minimum, you will need the following:

• Title page: Remember the running head. The title should be in all capitals. 
• Length: 3 pages minimum 
• Abstract: This is a summary of your paper, not an introduction. Begin writing in third person. 
• Body: This begins on the page following the title page and abstract page and must be double-spaced (be careful not to triple- or quadruple-space between paragraphs). The typeface should be 12-pt. Times Roman or 12-pt. Courier in regular black type. Do not use color, bold type, or italics, except as required for APA-level headings and references. The deliverable length of the body of your paper for this assignment is 3 pages. In-body academic citations to support your decisions and analysis are required. A variety of academic sources is encouraged. 
• Reference page: References that align with your in-body academic sources are listed on the final page of your paper. The references must be in APA format using appropriate spacing, hanging indent, italics, and uppercase and lowercase usage as appropriate for the type of resource used. Remember, the Reference page is not a bibliography but a further listing of the abbreviated in-body citations used in the paper. Every referenced item must have a corresponding in-body citation.