The Genesis Energy 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 Energy to have a reliable source of funds for both short-term and long-term needs.
One of Genesis Energy’s potential lenders tells the team that in order to be considered as a viable customer, Genesis Energy must prepare and submit a monthly cash budget for the current year and a monthly cash budget for the subsequent year. The lender will review the cash budget and determine whether or not Genesis Energy can meet the loan repayment terms. Genesis Energy’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 Energy 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 Energy management team held a brainstorming session to chart a plan of action, which is detailed here.
Since this expansion is critical to Genesis Energy expanding into new overseas markets, the operations management team has been asked to prepare an executive summary with supporting details for Genesis Energy’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.
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.
By the due date assigned, deliver your assignment to the Submissions Area.
Assignment 2 Grading CriteriaMaximum PointsCalculation of a detailed company cash budget for the upcoming year is complete and correct.
All inflow and outflow calculations are correct.
Summary of the sources and uses of cash, and identification of the external financing needs for the upcoming year is complete and correct.48Explanation how the assumed budget of this project will effect dividends for shareholders is clear, specific, and complete. The explanation includes all factors that the firm considers in dividend-decision making.32Recommended financing solution and cost to the firm are clear, complete, and correct. Financing solution includes short-term debt, long-term debt, or even equity.44Explanation of concerns associated with the firm’s cash budget and if it is a sign of weak sales performance or poor cost control is clear, complete, and correct.48Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources; and displayed accurate spelling, grammar, and punctuation.28Total:200