How to create a cash budget in excel

For this assignment you will utilize the excel template to create cash budgets using the example presented in the Chapter 16 PowerPoint. Your assignment will consist of the following:

1) You will create a sheet that prepares the monthly cash budget using the data below as well as the other data provided in the spreadsheet. (44.25 pts)

May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17
Anticipated level of sales $15,000 $20,000 $30,000 $50,000 $40,000 $20,000 $10,000 $5,000 $15,000 $25,000 $40,000 $35,000 $15,000
Estimated labor and raw materials $3,000 $25,000 $38,000 $30,000 $10,000 $5,000 $3,000 $12,000 $14,000 $31,000 $29,000 $14,000 $7,000
2) You will create a sheet that reflects the following changes: management believes that it can increase cash sales from 30% to 60% while reducing the desired level of cash to $4,000 for all months. (21.75 pts)

3) You will create a separate sheet to complete the following:

a) Provide an analysis of the results from the original cash budget created during step 1. The analysis will include a discussion of the anticipated sales in relation to the estimated labor and materials, as well as the overall month to month surplus cash or loan needed and what appears to be attributing to the surplus or need. The analysis should also include a discussion of the implications for the business as presented in the results.(6 pts)

b) If management increases cash sales from 30% to 60%, what type of investment policy does this action typically reflect? What reasons would management have for increasing the anticipated cash sales? Explain and support your response to each question. (4 pts)

c) Using the data, explain how the changes to cash sales and target cash balance would impact the need for external funds each month. What are the potential advantages and disadvantages of implementing the actions without adjusting overall sales? Your response should include a discussion of the goals of cash management, the goal of each action individually, as well as the combined effect on the external funds needed. (4 pts)

Monthly Cash Budget Example

Input Data
Anticipated level of sales

Estimated labor and raw materials

Cash sales 30%
Collections during month after sale

90%
Collections during second month after sale

10%
Other cash receipt - Treasuries (Jun-16)

$10,000
Other cash receipt - Tax refund (Dec-16)

$1,000
Target cash balance (May thru Jan)

$10,000
Target cash balance (Feb thru April)

$6,000
Interest, rent and administrative expenses

$3,000
Other cash disbursement - income tax payments (Sep-16)

$2,500
Other cash disbursement - retire debt issue (Aug-16)

$1,000
Other cash disbursement - retire loan (Jan-17)

$25,000
Cash on hand (May 1, 2016)

$12,000
Prepare a monthly cash budget for the next thirteen months.

Anticipated Sales

Sales (gross)
Cash sales
Collections
During 1st month after sale

During 2nd month after sale

Other cash receipts

Total Cash Receipts

Disbursements
Variable: Labor and raw materials

Fixed: inteerst, rent, and admin expenses

Other cash disbursements

Total cash disbursements

Cash Surplus (or Loan Requirement)

Cash gain (or loss) during the month

Cash position at beginning of month

Cash position at end of month

Target cash balance