Analysis of monthly cash budget of Cyrus Brown Manufacturing Company Essay

Analysis of calendar periodical bills budget of Cyrus cook Manufacturing Company - Essay ExampleWe pull up stakes note from the income statement the net cash inflows from operations during the division after(prenominal) deducting the direct manufacturing costs and indirect expenses. As exposen from the FS, the sales forecast for March and April be not sufficient to produce profit for the said months as expenses exceed project sales. For the month of May, profit forget be realized as projected sales have been increased. A substantial loss is seen for the month of June. A brief analysis of the data reveals that the loss is because of an investment made for plant structure and defrayment of taxes. The biggest sales forecast comes in September however, it is also coupled with corresponding increase of expenses that includes second installation of payment of taxes total expenses are 90% of sales. Accordingly, expected profit is reduced. There is a 42% miss in sales in October w hich is quite significant as it will also considerably ingrain the projected profit of the company and will reduce the cash receipts for the month. There is no translation why the forecast of sales has gone down in October and November. TheTaxes have been deducted from the computations so the stipend that are shown in the balance are NET, that is no tax and interest have to be deducted. The net earnings are funds available for other uses like payment of debts or for other investments (Investorwords, n.d.) A projected monthly cash flow statement for March to November is presented for CBM to show the incoming and outgoing cash in the operations of the business. (See Annex 1). A cash flow has been defined as an accounting process that shows the diversion of amount of cash in the beginning (opening balance) and the amount at the end of the period (closing balance) (Business Dictionary.com., n.d.). Management of cash flows is an important part of the business operations because most often it becomes the source of failure for most businesses. Thus, FindLaw (n.d) contends that when the possessor of the business understands the concept of cash management, he is prepared in the unforeseen eventualities in the business because he has a plan. Cash flows may become positive or negative during operations. When it is positive, business is shown to be in a healthy condition, while negative cash outflow shows internal problems in the operations. For CBM, its cash ready shows negative cash outflow in the first two months of operations because of poor allurement in March and slow growth of sales in March up to April. Cash flows will show the sources of funds used in the operations and how and where the funds are used. For sources of funds CBM provided an opening balance of $50,000 and collections from monthly sales. For March, only 75% of projected sales are expected to be collected. From April to November, 100 percent collection is expected to be collected. Because expe nses are more than the funds collected from March to June there is a deficit of funds for this period. Due to this, CBM needs to get outside sources of funds to finance its operations for March, April and June. There is a large cash outflow in June because of a capital investment and payment of taxes in June, after which cash flow becomes positive and profit accrue to the business. The cash on hand provided by CBM is $50,000.00 and it will need additional funds to support its operations. Approximately CBM needs a minimum credit airwave of $24,500 to draw for its monthly shortage of funds. It is assumed that CBM had provided capital for operations and there is no need to start additional funds. Conclusion. A cash flow projection