Question

Cash is King!

Good cash management is an essential job of the financial manager! You own a small auto sales business called King Kars. You stock up on inventory in February, April, June, and September. Your annual cash budget indicates that your MONTHLY NET CASH for the year will be the following:

JAN $5,000
FEB -$30,000
MAR $20,000
APRIL -$35,000
MAY $25,000
JUNE -$10,000
JULY $25,000
AUG   $25,000
SEPT -$30,000
OCT $15,000
NOV $15,000
DEC $25,000

You begin the year with a cash balance of $50,000, and the minimum cash balance desired must be $50,000 every month. Prepare a cash flow summary and external financing summary as noted in the Excel spreadsheet assigned to this submission.

1. Do you believe that the company needs outside financing?
2. What is the minimum line of credit to request from a lender?
3. Do you think you are a good candidate for the line of credit? Why?

Please submit the Excel template below, saved under your name, with the columns and rows completed with the cash flows. Also in this template, you must include the answers to questions 2 and 3 in the assignment.

JANUARY   FEBRUARY   MARCH   APRIL   MAY   JUNE   JULY   AUGUST   SEPTEMBER   OCTOBER   NOVEMBER   DECEMBER                                                        GIVEN:    MONTHLY NET CASH GAIN OR LOSS         $5,000    $(30,000)   $20,000    $(35,000)   $25,000    $(10,000)   $25,000    $25,000    $(30,000)   $15,000    $15,000    $25,000                                                                   JANUARY   FEBRUARY   MARCH   APRIL   MAY   JUNE   JULY   AUGUST   SEPTEMBER   OCTOBER   NOVEMBER   DECEMBER    CASH FLOW SUMMARY                                                                                                             1. Cash balance at start of month                                                      2. Net cash gain (loss) during month                                                      3. Cash bal. at end of month (before financing)                                                      4. Minimum cash balance desired                                                      5. Surplus cash (OR) Deficit cash (Line 3 – Line 4)                                                                                                             EXTERNAL FINANCING SUMMARY                                                                                                             6. External financing balance - start of month                                                      7. New financing req'd (negative of Line 5) (if deficit!)                                                      8. Financing repayments (if surplus!)                                                      9. Ext financing balance – end of month                                                      10.Cash bal. at end of mo (Line3 + Line7 + Line8)

Answer 1